Posted on September 6, 2022
The South Korean investment company that acquired the former STX Offshore & Shipbuilding in 2021 has completed the acquisition of a second midsized shipbuilder as the government seeks to continue the privatization of the industry. Daehan Shipbuilding, with its yard in Haenam on the southwest coast, was established in 2004 working mostly as a builder of tankers was acquired by a investment group led by KH Investment.
The South Korean government-controlled Korea Development Bank has been seeking to sell its holding both in the smaller shipbuilders as well as rumored to be actively seeking a buyer for the larger Daewoo Shipbuilding & Marine Engineering. Bank officials during a meeting with the media questioned the use of public funds to support the shipbuilders saying they preferred to place the companies in private hands. With the sale of Daehan, along with STX and Hanjin last year, KDB’s last shipbuilder investment is DSME.
Daehan, which was an affiliate of Daejoo Group, entered a debt workout program during its restructuring in 2009. Korea Development Bank became its lead investor in 2014 when the shipyard emerged from court management. KH Investment was named the preferred bidder in January and signed the contract for the buyout in May.
KH Investment Group completed the acquisition paying $148 million for a 95 percent stake in the shipyard. KH Investment led a consortium that also includes Korea Investment Private Equity and SG Private Equity. The monies will be used to repay the shipyard’s outstanding debt.
Last year, KH Investment acquired the last elements of STX rebradning the operation as K Shipbuilding as the lead in another consortium. Since then, K Shipbuilding has been moving aggressively to build the business. K Shipbuilding has won its first new commercial contracts and is focusing on developing advanced technologies. Speaking about the strategy, KH Investment said that it seeks to further grow its capacity in shipbuilding. Reports are that the consortium hopes to create synergy through business cooperation between the two shipbuilders to improve operating efficiency and cut costs.
Daehan Shipbuilding has been moving to diversify its business from its roots in Aframax tankers. In 2020 they won their first contract for a shuttle tanker and in 2021 for their first LNG dual-fuel propulsion ships. In April this year, Daehan reported its first contracts to build a medium-sized class of containerships. The contract with Greece’s Danaos is for the construction of four 7,200 TEU methanol-ready containerships that will begin production in April 2023 and be delivered starting in April 2024. The yard was also linked to an order for four 1,000 TEU boxships for Pan Ocean. Working with Mokpo Maritime University and Korean Register, the shipbuilder also recently won an AiP for its design of a 115,000 dwt ammonia-ready crude/product oil tanker.
Korea’s midsized shipbuilders have been taking advantage of the order surge and long waiting times for building slots at the largest yards. They have presented a niche alternative that can provide quicker turnaround times for owners anxious to have new tonnage.