Asia Times | Korean shipbuilding merger hits headwinds

In the land of giants, a true colossus is set to rise. In South Korea, home to the worlds largest shipbuilders, two of the top three companies Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering  are set to merge, forming a combined entity which would hold more than 20% of the global market for ships and offshore platforms.

Or perhaps not.

The merger plan faces major barriers, from union fury at both HHI and DSME to the need for approval from antitrust regulators around the world. And one expert with decades of experience in the Korean shipbuilding industry has come out against the merger.

Farewell, 1997

Last Friday, HHI signed an agreement to take over a controlling stake in DSME from the largest-stakeholder, state-run Korea Development Bank, or KDB.

If the deal goes ahead, it would mark at long last the Korean states exit from the most traumatic economic experience the country has suffered since it was founded in 1948: The 1997-8 Asian financial crisis.

That crisis sparked a huge number of state bailouts, but most of the acquired assets have since been disposed of and reprivatized. DSME is the last major company still owned by the Korean taxpayer. In addition to KDB, another major stakeholder is the Korean National Pension Fund.

South Koreas and Asias biggest corporate victim of that crisis was Daewoo Group. In 1999, the sprawling chips-to-ships conglomerate imploded under US$50 billion in debt that had been camouflaged by fraudulent accounting. At the t....

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