Hanwha’s takeover of Daewoo shipbuilding: Next step on road to becoming global defense firm?

Posted on : 2022-12-19 17:00 KST Modified on : 2022-12-19 17:00 KST
Hanwha Group purchased a 49.3% stake in Daewoo Shipbuilding & Marine Engineering
Hanwha Group and Daewoo Shipbuilding & Marine Engineering’s respective offices in downtown Seoul on Dec. 16. (Yonhap)
Hanwha Group and Daewoo Shipbuilding & Marine Engineering’s respective offices in downtown Seoul on Dec. 16. (Yonhap)

The Hanwha Group is now the owner of Daewoo Shipbuilding & Marine Engineering (DSME) after participating in a rights offering worth 2 trillion won (US$1.5 billion) on Friday.

Hanwha is taking the first step toward staking out a place for itself in the energy industry and the terrestrial and space defense industry, along with finance and retail. But there are also concerns about how the group may be impacted by DSME’s accumulated deficit and massive debt.

The Hanwha Group drew 1 trillion won from Hanwha Aerospace, 500 billion won from Hanwha Systems, 400 billion won from Hanwha Impact, and 100 billion won from three subsidiaries of Hanwha Energy to purchase a 49.3% stake in DSME. The fact that the biggest investments came from its aerospace and energy affiliates indicates that Hanwha expects the acquisition will strengthen its future competitiveness in the defense industry and the green energy sector.

Competitiveness in the maritime defense industry and wind power industry derives from shipbuilding, including the capacity to transport and store hydrogen and liquefied natural gas and produce floating structures. If Hanwha were to also acquire Korea Aerospace Industries, its defense operations would cover the air, sea and land.

But Hanwha faces some major challenges, including the need to address DSME’s debt and deficit and to reckon with an economic downturn on the horizon. DSME posted 1.33 trillion won in losses through the third quarter of the year.

As of the end of September, DSME’s debt ratio was above 1,400% (under separate accounting). Furthermore, concerns about a slowdown in the global economy cannot be regarded as a favorable atmosphere for the shipbuilding industry.

“Our acquisition of Daewoo Shipbuilding & Marine Engineering is designed to create synergy in the areas of defense and energy. We concluded the contract after reviewing mid- and long-term projections through six weeks of detailed due diligence,” explained a spokesperson for the Hanwha Group.

By Choi Woo-ri, staff reporter

Please direct questions or comments to [english@hani.co.kr]

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Related stories