DSME union opposes Doosan bid

A 50.4% stake in DSME is due to be put up for sale later this year and Doosan Group?s expected bid for a controlling stake in South Korea?s Daewoo Shipbuilding and Marine Engineering is being opposed by the shipbuilder?s labour union.

The DSME union pointed to ethical problems involving Doosan?s top management as the basis for its opposition. “We must stop Doosan?s takeover attempt by all means. If Doosan buys DSME, labour-management relations are bound to become confrontational,” the union said in a recent statement. A union representative referred to accusations that the family that controls Doosan has been involved in corrupt management practices such as window-dressing and the creation of slush funds, and that the company had a policy of forcing layoffs when it acquired other firms.

Union sources have hinted that there are similar grounds for opposition to the Hanhwa Group, another chaebol that has declared its interest in the 50.4% of DSME that will be up for grabs when creditors launch a tender later this year.

Posco, GS Group and STX Group have also expressed interest in taking over DSME. Above all, GS Group, the country’s eighth largest conglomerate by market capitalization, has expressed strong interest and determination to acquire the shipbuilder.

The group firmly believes it has a competitive advantage over other conglomerates such as POSCO and Doosan, saying that their takeover attempts will result in a “zero sum game.” It said, “It will be like acquiring a customer, if the steel maker or the heavy machinery firm consolidates DSME, which will only achieve a losing profit relationship.” On the contrary, GS believes its acquisition of the shipbuilder will increase synergy with businesses it holds interest in energy, engineering and construction.

“The deal will be a win-win as both companies can join forces by utilizing expertise of GS in plant construction and energy, and Daewoo in shipbuilding and marine plants,” a group spokesman said. Since 2005, the group put GS Holdings at the forefront to set up a team of mergers and acquisitions (M&A) specialists led by its CEO Suh Kyung-suk for the acquisition of DSME.

It has been talking with shipbuilding experts and analysts on ways to win the company and maximize synergy between energy and marine engineering. In a meeting with executives at the group headquarters in southern Seoul, its Chairman Huh Chang-soo called for gaining a competitive edge through investment once strategic choices are made. “We must push forward to win businesses that have the potential to help the group in developing future growth engine,” said Huh, showing his full commitment to purchase the shipbuilder.

DSME’s controlling shares are held by two state-run creditors, i.e. the Korea Development Bank and the Korea Asset Management Corp., with a combined 50.4% stake.

Should the group achieve its takeover goal, GS plans to maximize and strengthen its

energy business by utilizing DSME’s logistics for the gas and oil industry. It has an advantage to see it through as GS Caltex, the country’s second largest oil refiner, has strong ties with the Middle East where more than 70% of the shipbuilder’s sales and orders come from. Also, GS Engineering & Construction has built a strong network in the region through projects involving energy plants.