A recovery in the South Korean shipbuilding industry has given potential buyers of mid-sized companies easier access to acquisition financing provided by domestic banks and securities firms.
A consortium led by Dongil Steel is expected to fund its takeover of Dae Sun Shipbuilding & Engineering with acquisition financing provided by a local financial institution, industry sources said on Monday (November 2). Dongil Steel plans to reduce participation by financial investors and use acquisition financing and money from companies within the consortium.
Market insiders see a stronger possibility of Dae Sun Shipbuilding being sold this time, after its failed attempt in 2018. Securing acquisition financing would be the final piece of the puzzle in Dongil Steel’s takeover.
Meanwhile, a consortium of Korea Development Bank Investment and Keistone Partners is expected to successfully finance a takeover of Hanjin Heavy Industries & Construction through a domestic financial institution. Talks are being held with a local securities firm about acquisition financing, and they are expected to proceed smoothly as the brokerage is positive on the deal.
Investor sentiment toward takeovers of shipbuilding companies has improved thanks to the recent recovery of the domestic shipbuilding industry.
“More financial institutions appear to provide acquisition financing for mergers and acquisitions of domestic mid-sized shipbuilders,” said an industry source. “The mood has changed compared to the past when they shunned deals that include shipbuilding or materials and equipment industries.”
A funding plan by a consortium of KHI Investment and United Asset Management Company is also likely to lead to the sale of STX Offshore & Shipbuilding, which is led by EY Han Young. United Asset Management Company is reviewing options to finance the deal with its money in hand, use a private equity fund or raise acquisition financing. (Reporting by Ik-hwan Choi)