The largest shareholder of Daewoo Shipbuilding and Marine Engineering has denied speculation about the shipbuilder’s takeover of its debt-ridden rival, STX Offshore and Shipbuilding.
The state-run Korea Development Bank, the main creditor of DSME, said Sunday that speculation about DSME’s takeover was “unrealistic.”
“Merging KOSPI-listed DSME and STX, which is under a restructuring program, would most definitely anger shareholders,” a KDB official said on condition of anonymity. “The rumor is simply unrealistic.”
The speculation emerged after KDB last week appointed STX president and CEO Jung Sung-leep as the new CEO of DSME, the country’s second-largest shipbuilder.
The appointment sparked speculation among local investment banks about Jung’s role as a “bridge” between the two organizations for the merging process. Jung had worked at DSME for 31 years before assuming the STX post.
Some in financial markets said that if the takeover was made, STX’s credit ratings would rise and the company would be listed on the stock market.
But for DSME, absorbing STX could be a double-edged sword that would allow the firm to strengthen its engine-related capabilities, but at the same time increase its deficits.
DSME’s net profit last year plunged 86.4 percent on-year to 33 billion won ($30.1 million) due to losses from trading currencies and tax investigation.
In November, Samsung Heavy Industries’ merger plan with Samsung Engineering was scrapped due to the backlash from shareholders, citing Samsung Heavy’s potential worsening financial health and shareholder value.
“The scenario is most likely to be the same as Samsung’s case,” a market analyst at a Seoul-based securities firm said, declining to be named.
“Industries that have run into difficult times ― steel and shipbuilding ― appear to be attempting to overcome the situation by mergers and other measures,” she said, adding that buying STX would hurt DSME’s sales.
By Suk Gee-hyun (monicasuk@heraldcorp.com)