Hyundai Heavy Industries Co., the world’s largest shipyard by sales, is set to buy its smaller local rival Daewoo Shipbuilding & Marine Engineering Co., the state-run Korea Development Bank said Tuesday.
KDB said Samsung Heavy Industries Co., a major South Korean shipyard, has stated its intention not to join the race to take over Daewoo Shipbuilding.
Hyundai Heavy and KDB will sign an official deal in early March.
Last month, the two signed a temporary deal.
KDB is Daewoo Shipbuilding’s main creditor, with a 55.7 percent stake in the company.
KDB said earlier it would contact Samsung Heavy to see if it is interested in the Daewoo Shipbuilding takeover.
If the takeover, estimated at over 2 trillion won (US$1.78 billion), goes ahead, the South Korean shipbuilding industry is expected to be dominated by two major shipbuilders — Hyundai Heavy and Samsung Heavy.
South Korean shipbuilders, once a cornerstone of the country’s economic growth and job creation, had been reeling from mounting losses in the past few years, caused by an industrywide slump and a glut of vessels amid tough competition with Chinese rivals.
The government has been hoping that the local shipbuilding industry can be overhauled in a way that two major players can dominate the sector to better compete against Chinese rivals and tackle sectoral ups and downs.
Daewoo Shipbuilding ended a debt rescheduling program in August 2001 after being told to streamline operations in August 1999. Its parent Daewoo Group collapsed under heavy debt in the wake of the 1997 financial crisis.
In 2009, KDB put Daewoo Shipbuilding back on the block after scrapping a deal to sell a controlling stake in the shipyard to Hanwha Group.
So far, up to 10 trillion won has been spent to salvage Daewoo Shipbuilding.
The combination of the two shipbuilders would create an unrivaled player in the sector. As of last year, Hyundai Heavy had an order backlog totaling 11.14 million compensated gross tons (CGTs), the largest among others in the sector. The comparable figure for Daewoo Shipbuilding was 5.84 million CGTs.
Their combined order backlog accounts for 21.2 percent of the total around the globe.