DSME Recapitalization Completed as Shipbuilder Becomes Hanwha Ocean
Shareholders of Daewoo Shipbuilding and Marine Engineering gave the final approval for the deal brokered by the Korea Development Bank in September 2022 for Hanwha Group to take control and recapitalize the financially troubled shipbuilder. At the extraordinary meeting today, they elected Hanwha’s management team and directors, cleared the way for the recapitalization, and officially changed the name of the company to Hanwha Ocean.
The companies later proceeded with the recapitalization transaction in the form of a rights offering valued at $1.52 billion. Five of the groups including aerospace and systems from Hanwha, one of South Korea’s ten largest conglomerates, officially participated in the offering acquiring shares of the company. DSME also reported that it was proceeding with a stock sale to designated investors to raise $100 million to be specifically used at paying off debt. It brought to an end a 21-year workout engineered by KDB to rescue and prop up the shipbuilder. DSME in recent months continued to lose money reportedly ending up with a debt ratio of 1,542 percent.
“We will build Hanwha Ocean into a sustainable, eco-friendly technology company, a global innovation leader with the world’s best competitiveness that can generate stable profits under any circumstances,” wrote Kwon Hyuk-woong, president of Hanwha’s support division who became CEO of the new company, in a message to employees.
Hanwha has said that it looks to leverage the shipbuilder’s long heritage in submarines and naval vessels combined with its weapon systems and warship component manufacturing such as radar and navigation systems. The company told shareholders that the deal would pave the way to create a powerhouse in space, land, and sea.
Concerns had been raised by competitors that Hanwha Ocean might have an unfair advantage or ability to block other competitors from future government contracts. As a concession, Hanwha agreed to report to Korea’s Fair Trade Commission every six months for three years on steps taken not to discriminate against competitors. It is also required to make systems data critical to the bids available to competitors and maintain level pricing for critical systems between its shipbuilding division and competitors.
Hanwha now holds a 49.3 percent stake in the former DSME along with management control. It marks the second time Hanwha attempted a takeover of DSME, having previously made an offer to KDB in 2009 but was unable to reach terms of the financial arrangements. It marks the second time in 45 years that the shipbuilder has been taken over, previously having been sold to Daewoo Group in 1978.
KDB now holds a 28 percent stake in the new company. The government-controlled bank had said that private capital was required to maintain the shipbuilding operations. They said today that with investments in research and development along with efficient management practices Hanwha Ocean is poised to once again become a global leader in shipbuilding.