Hyundai Heavy bidding for Daewoo

POSCO and Hyundai Heavy Industries officially expressed interest in acquiring a majority stake in world No. 3 shipyard Daewoo Shipbuilding & Marine Engineering estimated at up to $8 billion.

The successful buyer could secure a new growth engine from the lucrative energy-related business and strong cash flows of the shipbuilder. Cash-rich POSCO and Hyundai Heavy are seen as particularly strong contenders as the government has cautioned against debt-laden purchases. Energy- and construction-focused GS Group and Hanwha Group, led by chemicals maker Hanwha Corp also handed in letters of intent to buy the shipbuilder.

State-owned Korea Development Bank (KDB) and a government agency have put up for sale their combined 50.4 % stake in Daewoo Shipbuilding, in a deal expected to bring in more than double its current market price due to the heated competition.

Some analysts are concerned about the high premium building on Daewoo as the global credit crunch raises borrowing costs and the government has called on companies to refrain from financing M&A deals with heavy debt.

KDB will screen parties that submitted letters of intent in the next couple of days and weed out disqualified bidders.