South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME) has decided not to acquire a majority stake in STX France for now as the shipbuilder wants to focus on stability, rather than external growth.
DSME CEO Jung Sung-Leep made the announcement at a press conference on 25 June to coincide with his inauguration.
DSME’s finance head Kim Yul-Jung and corporate planning head Cho Wook-Sung were with Jung, who was previously co-CEO of STX Offshore & Shipbuilding.
It was thought that Korea Development Bank, a lead manager for the sale and also a shareholder in DSME, would get it to take the majority stake in STX France, but DSME’s labour union objected.
At the conference, Jung said, “Our recent performance has been poor and there is a possibility that our labour union would oppose to the plan. Given this, we are not planning to acquire STX France at the moment.”
Related news:New STX O&S boss vows to realise recovery
The oil shock has resulted in South Korea’s big three shipbuilders’ failure to clinch any drillship orders year to date. Compared with commercial vessels, drillships are the cash cow for shipbuilders because of their higher value.
Due to its financial problems, the STX Group put its European yards in France and Finland up for sale in 2013. STX Finland was acquired by German shipbuilder Meyer Werft and the Finnish government in 2014. The French government has a 33.34% stake in STX France, which primarily builds cruise ships.
Jung continued, “We estimate that approximately KRW30 billion (USD26.7 million) would be needed to acquire the stake. If we sell our building in Dangsan-dong, Seoul of which the market price is KRW45 billion, the acquisition would not be a problem. However, buying a shipyard that builds cruise ships is too early for us although building cruise ships should be included in our business portfolio one day.”
The financial result of DSME has deteriorated into red ink for the first quarter of 2015. The country’s third-biggest shipbuilder had an operating loss of KRW43.3 billion and a net loss of KRW172.4 billion for the first quarter of 2015, reversing an operating profit of KRW471.1 billion and a net profit of KRW32.95 billion in the same period a year ago.