The Korea Herald


Korea to exclude foreigners from DSME sale

Policymakers say the shipbuilder is part of the defense industry

By Kim Yon-se

Published : Dec. 10, 2013 - 20:00

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Financial authorities plan to prevent foreign investors from bidding for the state-funded Daewoo Shipbuilding & Marine Engineering.

Government officials said Tuesday that the state policy decision came after Russia’s state-controlled oil producer Rosneft was rumored to have recently expressed interest in DSME, which is scheduled to be put up for auction in the coming months.

An official cited national security reasons for the exclusion of non-Korean bidders, saying that the shipbuilder manufactures “hold defense-related technologies. Aside from commercial ships, Daewoo Shipbuilding produces warships and submarines.”

He also said any foreign investor would have to garner the Korean government’s approval should it want to acquire more than a 10 percent stake in the company, under the defense and financial regulatory laws.

His remarks mean that the chance of a foreign investor becoming the majority shareholder of DSME, with more than a 50 percent stake, is practically infeasible.

Some foreign news reports have stated that Rosneft was in contact with Korean government officials over the upcoming bid after it signed a memorandum of understanding with Daewoo Shipbuilding on strategic business coordination during the Korea-Russia summit several weeks ago.

According to a Russian news report, Rosneft has formed a consortium with Russia’s banking giant Gazprom and state-run shipper Sovcomflot.

The authorities have begun an earnest push to sell DSME, with the aim of retrieving the taxpayer money injected into the shipbuilder, by the second half of 2014.

The scheduled auction plan was mapped out by the Korea Development Bank and the Financial Services Commission, the two main shareholders of the firm.

In an initial step, the FSC ― through its executive arm, the Public Fund Oversight Committee ― reduced its stake in the company from 17.15 percent to 12.15 percent by selling off 9.57 million shares through a block deal on the Korea Exchange in October.

As its next step, market insiders say, the FSC is seeking a package deal through which it will dispose of most of its remaining 12.15 percent stake along with the 31.46 percent stake held by Daewoo Shipbuilding’s biggest shareholder, KDB.

The sale package guarantees higher bidding prices for the authorities, as the dominant stake means a simultaneous takeover of the management right for an acquirer.

“Considering the FSC’s recent comments on the necessity of fast retrieval of taxpayers’ money, there is a high possibility that the authorities will put the company up for auction during the first quarter of 2014,” said an analyst who specializes in M&A.

While the National Pension Service is the third-largest shareholder, with an 8 percent stake, retail investors hold a stake of about 43 percent in the company.

By Kim Yon-se (