DSME acquisition could be approved by shipbuilder's board soon

Daewoo Shipbuilding & Marine Engineering’s (DSME) Okpo shipyard in Geoje, South Gyeongsang [YONHAP]

The board of Daewoo Shipbuilding & Marine Engineering (DSME) will likely approve the acquisition by five Hanwha companies of the debt-ridden shipbuilder next Monday, according to local media reports.

A spokesperson at DSME said Tuesday the board meeting will be held in “early May” without confirming the exact date. A shareholder meeting is expected to take place two weeks later, on May 22 at the earliest.

The reports follow the approval from all required antitrust authorities, including a nod from Korea’s Fair Trade Commission last Thursday. The board members will decide multiple issues, such as the recommendation of new directors and DSME's new name in the wake of the 2 trillion won ($1.5 billion) deal. The new name is highly likely to be Hanwha Ocean, as it was submitted in a trademark application to the Korean Intellectual Property Office in March.

Hanwha Aerospace, Hanwha Systems, Hanwha Impact Partners, Hanwha Energy Singapore and Hanwha Convergence will acquire a 49.3 percent stake in DSME as early as this month.

This is the first time DSME has been in private hands since Korea Development Bank, a state-run creditor, became its largest shareholder as a part of a government-led debt workout in 2001.

The buyers must address the challenges facing DSME, as the shipbuilder's higher debt ratio has gotten worse since the initial announcement of the acquisition in September 2020.

According to DSME's annual report, its operating loss in 2020 was 1.61 trillion won, and its debt ratio, based on the figures at the end of last year, skyrocketed to 1,542.4 percent.

DSME is also struggling to secure new contracts despite an upturn in shipbuilding. The company's order backlog plummeted from $4.2 billion in the first quarter of last year to $800 million this year, a disappointing performance compared to its competitors.

It is also facing a severe shortage of essential personnel.

More than 160 employees moved to rival firms last year, including the exodus of mid-level managers and special ship design personnel, according to the acquirers.

Against this backdrop, DSME's workforce, which once numbered 13,000 employees ten years ago, has decreased to 8,300 employees at the end of last year.

Despite these risks, the buyers say they are acquiring DSME as part of a larger effort by the nation to rebuild its domestic industries and expand its global defense capabilities.

"We have decided to acquire DSME from the perspective of strengthening national competitiveness by swiftly normalizing the management of DSME and fostering a key industry," the buyers said in a statement.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]