Hyundai Heavy Industries (HHI) Group has signed a definitive agreement with state owned Korea Development Bank (KDB) to acquire Daewoo Shipbuilding & Marine Engineering (DSME).
HHI is the world’s largest shipbuilding company. Its headquarters are in Ulsan, South Korea. HHI was founded in 1972 by Chung Ju-yung as a division of the Hyundai Group, and in 1974, completed building its first ships
The definitive agreement builds on the heads of agreement (HoA) that was signed between HHI and KDB on 31 January this year. It will see KDB will make a contribution-in-kind to Korea Shipbuilding & Offshore Engineering (KSOE, named tentatively), to be established as a sub-holding company spun off from HHI to control the group’s shipbuilding companies including HHI, by transferring its shares in DSME in return for an equity stake in KSOE.
The definitive agreement states, amongst other things, that HHI and KDB will perform due diligence of DSME and HHI, respectively; the two parties will exercise their best efforts to complete the transaction unless the due diligence reveals a fact or matter that would have a material adverse effect on either of the target companies; and the parties will commit no unlawful act that would adversely affect the standalone business operations of HHI and DSME until the acquisition is officially authorised by the government authorities, According to the statement,.
HHI and KDB also pledge to guarantee employment security of DSME workers and continued relationships with DSME’s current business partners. The two parties are entering into this agreement “with an ultimate aim of stimulating employment and revitalising the local economy”, they jointly state, promising to maintain the current management structure of DSME, keep employment of DSME’s workers secure and continue the business relationships with the existing subcontractors and suppliers of DSME.
“HHI Group’s post-acquisition strategy is, to have its four shipyards, which would now include DSME as the latest addition to the group’s portfolio of shipbuilding business, focused on design, manufacturing and sales activities, which will be controlled by KSOE specialised in R&D and engineering, with a view to taking HHI Group’s competitiveness to the next level,” declared Kwon Oh-gap, Vice Chairman and CEO of HHI Holdings,