Hanwha mentioned as strong candidate to acquire DSME's warship division

By Park Jae-hyuk

Hanwha Group has been widely talked about as a potential buyer of Daewoo Shipbuilding & Marine Engineering's (DSME) warship manufacturing division, amid the growing possibility of the unit's spinoff from the shipbuilder's commercial ship operation, according to market analysts, Monday.

The conglomerate's latest attempts to reinforce its defense systems business have also prompted market observers to expect it to acquire DSME's warship and submarine division, as part of efforts to enhance Hanwha's competitiveness in naval defense systems.

“There is always the possibility of the acquisition, given that Hanwha Group has grown with M&As and the group is set to expand its presence in the defense industry,” a local securities analyst covering the defense industry said on condition of anonymity. “Although its previous attempt to acquire DSME ended in failure in 2008, a warship manufacturer has been necessary for the group.”

The analyst added that the deal's success depends on the price and decision-makers at the state-run Korea Development Bank (KDB), which is DSME's main creditor.

In 2008, Hanwha Group was selected as a preferred bidder to acquire DSME, but the global financial crisis thwarted the attempt. There have also been rumors over the past few years that KDB is considering selling DSME to Hanwha Group.

When Hyundai Heavy Industries Group failed in its attempt to acquire DSME earlier this year, Hanwha Group was mentioned once again as one of the candidates to acquire the shipbuilder, along with POSCO Group and Hyosung Group. Back then, those groups were skeptical about the acquisition.

KDB Chairman Kang Seog-hoon told lawmakers last month that the creditors are considering splitting up DSME before selling it, which led to Hanwha Group drawing attention again.

Emulating Lockheed Martin, the group decided recently to integrate its affiliates dealing with defense systems by merging Hanwha Aerospace with its wholly-owned subsidiary, Hanwha Defense, and the defense division of Hanwha Corp.

Some industry officials pointed out that it is too early to talk about the possibility of Hanwha Group acquiring DSME's warship division, because KDB has yet to decide whether to split up the shipbuilder. The state-run lender is expected to announce its plans to improve DSME's competitiveness next month at the earliest, based on Boston Consulting Group's advice.

In addition, DSME's regular employees are protesting the spinoff plan, expressing concerns about the possible sale of the commercial ship unit to a foreign buyer.