Skip to content
  • KOSPI 3085.90 -64.03 -2.03%
  • KOSDAQ 964.44 -15.85 -1.62%
  • KOSPI200 420.43 -9.42 -2.19%
  • USD/KRW 1100.3 5.30 0.48%
  • JPY100/KRW 1,059.97 5.72 0.54%
  • EUR/KRW 1,337.41 6.22 0.47%
  • CNH/KRW 170.2 0.36 0.21%
View Market Snapshot

Shipbuilders

Three Korean consortiums in final bid for Hanjin Heavy

Dec 14, 2020 (Gmt+09:00)

Hanjin Heavy Industries' Yeongdo Shipyard in Busan, South Korea

South Korea’s Hanjin Heavy Industries & Construction Co. has drawn three final bidding groups comprised of domestic companies and private equity firms by the Dec. 14 deadline, according to investment banking sources.

Its creditor banks, led by Korea Development Bank (KDB), put up for sale a combined 83.45% stake, worth 600 billion won ($549 million), in the cash-strapped shipbuilder in October, as the country's shipbuilding sector is recovering from a years-long slump thanks to the shipping industry boom.

The final bidding groups are a consortium of KDB Investment and Keistone Partners; a consortium of Korea Real Estate Investment & Trust Co. (KREIT), Opus Private Equity, NH Private Equity and Dongbu Corp., a builder; and SM Group, a small Korean construction-focused group.

If the sale goes through, the mid-sized shipbuilder will find a new owner, four years after it entered a debt restructuring agreement with creditors in 2016. Hanjin faced financial difficulties after its Subic shipyard in the Philippines posted 2.5 trillion won in losses due to a sharp fall in new orders.

The creditor banks include Export-Import Bank of Korea and six other financial institutions from Korea and the Philippines, including Rizal Commercial Banking Corp. South Korean banks own 63.44% of Hanjin, with the Philippines-based lenders holding another 20.01%.

Among the three binding bidding groups, the KDB Investment-Keistone consortium is considered the strongest candidate. KDB Investment, a private equity arm of the state-run bank, is expected to create synergy for Hanjin by combining Hanjin's business with Daewoo Engineering & Construction Co., owned by the PE firm. Hanjin's business is made up of shipbuilding and construction.

The Opus PE and NH PE group recently joined forces with KREIT lto increase their chances of winning the auction, the sources said. They zoomed in on Hanjin's massive property holdings, planning to develop the land areas located in big Korean cities, including Seoul and Busan.

SM Group is the only strategic buyer running shipbuilding-related businesses. Its Chairman Woo Oh-hyun has told local media that he would use Hanjin’s Yeongdo shipyard in Busan as a ship repair yard for the time being.

VALUATION DIFFERENCE, PROPERTY VALUE 

The final bidding groups valued the majority stake in Hanjin Heavy at up to 400 billion won ($366 million), a 33% discount to the stake's market value of 600 billion won, based on Monday's market close.

Their valuation priced in uncertainties related to the Subic shipyard in the Philippines, while the creditors were demanding at least 500 billion won, according to the sources.

Some bidders are considering relocating the Yeongdo shipyard in Busan, South Korea’s second-largest city, to another region and redevelop, or sell the site for capital gains. But such a plan could face a backlash from its employees and citizens of  the city.

KDB, with a 16.1% stake in Hanjin, is also participating in the deal as a sale manager. It had picked local accounting firm Samil PricewaterhouseCoopers and KDB’s own M&A consulting team to handle the sale.

Separately, KDB Investment, established last year, has teamed up with Hyundai Heavy Industries Holdings Co., the world’s biggest shipbuilder. to vie for Doosan Infracore Co. Their consortium was recently chosen as the preferred buyer of a 36.07% stake in the construction machinery maker.

Write to Jun-ho Cha at chacha@hankyung.com

Yeonhee Kim edited this article.

Comment 0

0/300