Industrial Bank Refutes Controversy Over Daewoo Shipbuilding & Marine Engineering's Low-Price Sale... "Still Holds Shares"

[Image source=Yonhap News]

[Asia Economy Reporter Seongpil Cho] The Korea Development Bank (KDB) rebutted on the 27th regarding the controversy over the 'undervalued sale' of Daewoo Shipbuilding & Marine Engineering (DSME) to Hanwha Group, stating, "Considering the characteristics of this transaction, it is inappropriate to discuss whether this is an undervalued sale at this point."

According to KDB, if the investment agreement proceeds as planned, Hanwha Group will conduct a paid-in capital increase of approximately 2 trillion KRW targeting DSME, securing a 49.3% controlling stake. Due to the issuance of new shares, KDB's shareholding will decrease from 55.7% to 28.2%. KDB explained, "This case is not a sale of the shares currently held by KDB, but rather Hanwha Group raising new capital of about 2 trillion KRW for DSME."

KDB's position is that after DSME's corporate value increases through investment attraction from Hanwha, selling the held shares can maximize capital recovery. Additionally, KDB explained that if there is an investor offering better terms than Hanwha Group during a future public competitive bidding process, there is room to enter into a new contract with that investor.

KDB also rebutted the criticism that the sale price was undervalued compared to the acquisition price proposed during the 2008 sale attempt, stating that the financial situation at that time must be considered. Hanwha Group had also attempted to acquire DSME in 2008 but abandoned the acquisition midway due to the global financial crisis. The acquisition price at that time was 6 trillion KRW.

DSME's debt ratio stood at 713% as of June this year, about twice the 368% recorded in 2007. Its market capitalization was approximately 10 trillion KRW in 2007 but has decreased to about 2.36 trillion KRW as of September 23. KDB said, "Appropriate corporate value assessment requires consideration of the financial situation at each M&A timing." It emphasized, "Finding a private owner is essential for the fundamental normalization of DSME."

Earlier, on the 26th, KDB announced that DSME had signed a conditional investment agreement (MOU) with Hanwha Group, including a plan for a 2 trillion KRW paid-in capital increase. If the investment agreement concludes as scheduled, Hanwha will acquire the controlling stake in DSME for 2 trillion KRW.