South Korean Hyundai Heavy Industries, the biggest shipbuilding group globally, expressed its interest on buying, the second-placed, Daewoo Shipbuilding and Marine Engineering Co Ltd (DSME), during January. If the purchase proceeds, HHI would control more than 20% of the global market, according to Reuters. Also, Korea Development Bank (KDB), the biggest shareholder of DSME, reported, on January 31, that it has signed a conditional deal with Hyundai Heavy Industries Group to sell Daewoo shares.
The bank noted in a statement that it signed a MoU with Hyundai that includes liquidity support of 2.5 trillion won ($2.25 billion) for Daewoo. Additionally, the bank owns a 55.7% part of Daewoo.
One of the issues the HHI faces is that is the evaluation of the merger proposal by major countries, such as the US, the EU, China and Japan. Namely, according to local media, Chung Mong-joon, chairman of the Asan Foundation and the largest shareholder of Hyundai Heavy Industries Holdings, noted that these countries evaluate and decide if a merger would be beneficial for the local industry.
In addition, HHI, DSME workers oppose to future takeover. Specifically, the labour union at Hyundai Heavy Industries demanded from the company to provide job guarantees to its employees if it wants to go ahead with the takeover, while Daewoo Shipbuilding's labour is also concerned that the takeover will cause extended layoffs.
In fact, according to the Hyundai Heavy labour union, the relations between the management and the labour could get worse if the first proceeds with the takeover without guaranteeing current jobs. It also added that it should stop the closed-door negotiations, and promise the union's participation in the takeover process.
What is more, there are reports that both unions will go on a joint strike during March, when KDB and HHI will sign the deal for the takeover.