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July 22, 2024

Korea Prioritizes the Privatization of Daewoo Shipbuilding.

By Aakanksha Nigam

The sale of Daewoo Shipbuilding and Marine Engineering (DSME) to private investors, according to the new head of the Korea Development Bank, is one of the bank’s main priorities. For more than 20 years, the state-run banking organization has been the shipyard’s major investor.

Speaking to reporters at a press conference to commemorate his first 100 days in charge of the government organization that invests in Korean industry to assist development and promote firms, Chairman and CEO Kang Seog-hoon. Additionally, KDB makes investments in financially challenged businesses throughout their reorganizations to aid in their restoration to stability and sound finances. Kang was describing his priorities and the difficulties he believes the Korean industry will face.

KDB has sold a number of smaller shipyards to private investment companies, making DSME its final stake in the shipbuilding industry. It was announced that they completed the sale of Daehan Shipbuilding at the start of September. Several other medium-sized shipyards, including the remaining stake in the erstwhile STX, were also sold last year.

During the shipyard’s restructure in the late 1990s, KDB initially started involved with DSME. They took a 49 percent equity stake in the shipbuilder in 2000, making them the company’s largest stakeholder.

17 years later, in 2017, as part of a $2.8 billion recapitalization of the shipyard, DSME finalized a debt exchange agreement with KDB, increasing the bank’s stake to 79 percent (assuming all the options are exercised). However, it is said that DSME’s corporate worth has decreased from $4.8 billion, which was the bank’s first privatization proposal in 2008, to a valuation of roughly $1.2 billion as of 2019.
According to Kang, the shipyard “needs a lot of research and development and fresh investment,” with private investors being the best source for these investments, the Korea JonhAng Daily adds.

Over the past few years, KDB has researched various exit strategies for its investment in DSME. They were in favor of the proposed merger, which called for the shipyard to merge with Hyundai Heavy Industries. KDB has apparently been searching for a new private investor since the EU essentially rejected the merger. The situation has also reportedly been expedited by fresh financial difficulties at the shipyard, which got worse during a 51-day subcontractor strike this summer.

It has been reported that Kang is pushing for the successful sale of DSME “as fast as possible.” However, the head of KDB stated that it would not be viable to divide the shipyard into its commercial and government activity and sell the two sectors separately when discussing the choices. Recently, speculation centered on the potential for DSME to be divided up to enable its sale.

Speaking about his long-term plan, Kang stated that he is moving ahead with a scheme to relocate KDB’s headquarters from Seoul to Busan in order to put it near the main port and important businesses, such as the shipbuilding industry. The government and the bank have made plans to invest in the Korean industry, including significant efforts to encourage the shipbuilders’ adoption of new technologies and their leadership in automation and green technology. Over the next five years, the bank will invest more than $20 billion in the semiconductor sector, according to Kang.

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