Hanwha's acquisition approved by DSME shareholders

Industry

Published: 23 May. 2023, 19:23 Updated: 23 May. 2023, 19:52

Hanwha's acquisition approved by DSME shareholders

Hanwha Ocean's new logo [HANWHA OCEAN]

Shareholders of Daewoo Shipbuilding & Marine Engineering (DSME) approved Hanwha's proposal to acquire the money-losing shipbuilder on Tuesday, finalizing the 2-trillion-won ($1.5 billion) deal.

The shipbuilder's name was changed to Hanwha Ocean and its top management reshuffled after the shareholders' vote.

The acquisition process concluded six months after Hanwha companies signed the agreement to take over the troubled shipbuilder on December 16, 2022.

Following the shareholders' meeting, five Hanwha affiliates, including Hanwha Aerospace, Hanwha Systems, Hanwha Impact Partners, Hanwha Energy Singapore, and Hanwha Convergence, acquired a 49.3 percent stake in DSME through a 2-trillion-won rights offering.

Kwon Hyek-woong, the first CEO of Hanwha Ocean [HANWHA OCEAN]

Kwon Hyek-woong, former vice president of Hanwha's Support Division, was appointed as the first CEO of Hanwha Ocean.

Additionally, two former Hanwha executives, Kim Jong-seo and Jung In-sub, have been selected as internal directors. Kim will oversee the merchant marine division, while Jung will manage the Geoje business unit.

Kim Dong-kwan, the eldest son of Hanwha Corporation Chairman Kim Seung-youn and Vice Chairman of Hanwha Corporation, was named a non-executive director at Hanwha Ocean, and the vice chairman will make efforts to normalize the shipbuilder, according to Hanwha.

In a letter addressed to employees, newly appointed CEO Kwon expressed confidence in the capabilities of Hanwha Ocean's workforce and further emphasized the company's growth trajectory, driven by successful synergies with proficient companies through numerous mergers and acquisitions.

“Utilizing Hanwha Ocean's strong technology-oriented culture, we aim to develop it into a global company with world-class competitiveness focusing on fostering a sustainable and environmentally friendly technology enterprise that can consistently generate stable profits,” Kwon added.

The Korea Development Bank, now the second-largest shareholder with 28.2 percent shares, said, “The successful investment acquisition will enable Daewoo Shipbuilding to make a significant leap towards becoming a global industry leader through a private shareholder’s bold investments in research and development and efficient management practices.”

This marks Hanwha's second attempt to acquire DSME, following a failed bid 14 years ago. In 2008, Hanwha companies offered to buy DSME for 6.3 trillion won, but the deal fell through due to DSME employees' resistance and funding challenges during the global financial crisis.

Hanwha obtained approvals from foreign antitrust regulators from eight jurisdictions after it launched a renewed bid for the acquisition in September 2022.

Hanwha is required to report to Korea's Fair Trade Commission every six months for the next three years to make sure that it is not involved in any anti-competitive practices including discriminatory pricing of equipment for military vessels and transferring trade secrets.

Hanwha Ocean's Geoje business unit [HANWHA OCEAN]

Hanwha Ocean faces significant challenges, including its operating loss of 62.8 billion won and a debt ratio soaring to 1,858 percent as of the first quarter.

Moreover, the company is dealing with a severe shortage of key engineers, with over 160 employees having moved to rival shipbuilding companies last year, including mid-level managers and specialized ship design personnel, according to Hanwha.

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