Daewoo bidders look for foreign partners

Conflicting directions given by the financial authorities are creating confusion for bidders of Daewoo Shipbuilding & Marine Engineering (DSME). After Korea Development Bank (KDB), the main creditor of DSME, changed its stance Thursday, saying that foreign investors may bid for the shipbuilder that is estimated to fetch up to five trillion won or over $5 billion, the four-bidders, i.e. POSCO, GS Holdings and Hanwha Group and Hyundai Heavy Industries, are scouting strategic foreign investors.

“It is possible for foreign investors to join the race by forming a consortium with one of the bidders,” a high-ranking source from KDB said. “Foreign investors could buy a combined stake of Daewoo at a maximum of 49%. But one foreign investor may not buy a stake bigger than 10%,” the source added. KDB was negative over foreign capital in the DSME sale as the world’s third-biggest shipbuilder is also a key defence contractor building submarines and state-of-the art warships.

The four players will conduct due diligence on DSME from Sept. 16 to Oct. 6. Final bids for the shipbuilder will be submitted on 13 October and a preferred negotiator will be chosen in late October.

Following the virtual policy change by the government, one prominent bidder is considering sealing a partnership with some financial investors. POSCO had consistently said it would make an independent bid for Daewoo, holding 5 trillion won in cash. “As far as I know, some Europe and U.S.-based investment banks approached POSCO, in addition to Woori and Hana Banks. Now, we have opened the possibility to go with foreign partners,” a high-ranking POSCO source said.

Hyundai Heavy said it will review the option on whether to join a partnership with foreign-based financial investors, depending on the situation. “Still, we will go with our two affiliates Æ Hyundai Milo and Hyundai Samoa. But we will have the seller’s criteria reflected in our bidding in order to win,” a senior Hyundai source said.

Hanwha Group had anticipated the government’s sudden policy change. Earlier, it clarified that it will sell 9.9% stake in unlisted unit Korea Life Insurance as one fundraising option. Hanwha expects to raise $750 million from foreign investors.

“Well, we are making a ‘Plan B’ to grab a competitive edge over rivals in the race. The plan includes details of foreign investors,” a GS Group source said.