Russian consortium to acquire stake in DSME

The amount of the deal is estimated at US$1.5 to 1.9 billion. The deal may become part of the recent MoU signed between Rosneft, Gazprombank, Sovkomflot and DSME during a recent visit to South Korea by Russian President Vladimir Putin.

In addition to the MoU involving completion of building the Zvezda shipyard and technology contributions, the Russian investors have expressed interest in acquiring 31.26 % of the shares in DSME, which is 50.3 % owned by the Korean government. There is a possibility of an exchange deal involving the DSME stake and shares in the Russian Far East shipbuilding cluster. The deal could be completed in the first quarter of 2014.

Representatives of DSME declined to comment.

At present 31.26 % stake in DSME is owned by Korea Development Bank, another 19.11% by Asset Management Corporation of Korea, while the remaining 48.4% is privately owned by private shareholders. DSME shares are, in part, traded on the Korea Stock Exchange and the Luxembourg Stock Exchange.

The government of South Korea has sought to sell some of its DSME shares, having originally considered such a move in 2009, but due to the difficult economic situation this did not happen. At that time, according to sources close to Rosneft, the Korean government did not consider bids from foreign investors because of DSME’s involvement in building of warships.

Last year the Korean government hoped to sell the 31.2% stake for at least KRW 1 trillion (US$932 million); however the current price is estimated at $1.9 billion.

DSME was planned to partner of United Shipbuilding Corporation (USC) in the Zvezda shipyard project in 2009, but this cooperation failed to materialise. Russian analysts believe that a stake in DSME could offer the Rosneft, Gazprombank and Sovkomflot consortium the chance to place orders in foreign as well as domestic shipyards. Sovkomflot currently has LNG carrier orders with Korean yards and the acqusition of DSME will help the company to expand.

Russian analysts also believe that a share of DSME will allow Russian shipbuilders to obtain access to new technologies, and allow technologically complex orders to be placed abroad, especially as there is a risk of disruption in Russian shipyards. At the same time, according to analysts at the Russian Ministry of Industry and Trade, the current needs of Rosneft, Gazprom and Sovkomflot are significantly exceed the capacity of USC, so the transfer of orders overseas will become inevitable.