KDB drops shipyard deal with Hanwha

(ATTN: ADDS share prices in 5th para, details in last two paras)
SEOUL, Jan. 21 (Yonhap) -- State-run Korea Development Bank (KDB) decided
Wednesday to scrap a deal to sell a controlling stake in Daewoo Shipbuilding &
Marine Engineering Co. to Hanwha Group, whose demand to revise the terms of sale
were rejected, bank officials said.

The lender's board of directors made the decision to abort what would have been
the shipbuilding industry's largest acquisition to date, they said.
"The board of directors reached a consensus that Hanwha's funding plan was not
realistic and its proposal to buy a part of the stake was not acceptable," said
an official at KDB.
The state lender will also seize a deposit of 300 billion won (US$220 million)
that Hanwha put up for the deal, he said.
Shares of Daewoo Shipbuilding closed at 20,250 won on the Seoul bourse, down 0.74
percent, and those of Hanwha Corp., the group's de-facto holding company, dropped
5.16 percent to close at 25,750 won.
Hanwha signed a preliminary deal with KDB on Nov. 14 to buy a 50.4 percent stake
in Daewoo Shipbuilding & Marine Engineering Co. without a due diligence due to
opposition from the shipbuilder's union.
But a self-imposed year-end deadline to seal the deal was delayed by one month as
Hanwha demanded it be allowed to pay the 6.3 trillion won (US$4.56 billion) for
the stake in installments, citing difficulties in raising funds amid a credit
crunch.
KDB last week urged Hanwha to come up with a detailed and realistic plan for
funding the acquisition and threatened to scrap the deal if Hanwha fails to
finalize it by the end of the month.
There has been growing speculation that talks on the sale are likely to break
down as KDB is unlikely to revise terms of the sale.
Hanwha wanted to cut the price tag as shares of Daewoo Shipbuilding halved
compared with six months ago, hit by global financial turmoil and concerns about
a decline in shipbuilding orders.
KDB proposed to set up a private equity fund with institutional investors to buy
assets offered by Hanwha Group instead of accepting Hanwha's demand for payment
in tranches. Hanwha put down a 300 billion won deposit to make good on its
promise to complete the Daewoo deal.
Hanwha Group declined to comment on the decision saying that it has not yet been
notified of the formal decision.
Hanwha, whose business portfolio ranges from chemicals to finance services, is
expected to focus on its existing businesses, according to analysts.
The group has Korea Life Insurance Co., the nation's No.2 life insurer, under its
wing.
sam@yna.co.kr
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