Assessment of shipbuilder needed before formal deal: Hanwha

(ATTN: ADDS KDB's reaction in paras 7-9)
By Nam Kwang-sik
SEOUL, Dec. 26 (Yonhap) -- South Korea's Hanwha Group said Friday it is necessary
to conduct a due diligence on Daewoo Shipbuilding & Marine Engineering Co. before
the signing of a formal takeover deal to exactly assess the shipbuilder's value.
Hanwha signed a preliminary deal with the state-run Korea Development Bank (KDB)
on Nov. 14 to buy a 50.4-percent stake in the world's No. 3 shipyard without a
due diligence due to the shipbuilder union's opposition. A final deal is to be
signed on Monday.
Hanwha said the boards of its three subsidiaries -- Hanwha Corp., Hanwha Chemical
Co., and Hanwha Engineering & Construction Co. -- decided that a due diligence
should be conducted before a formal deal is signed.
If a due diligence is deemed impossible due to the timeline, "supplementary
measures" should be taken, Hanwha said.
"The companies made the decision in light of the fact that falling orders and
subsequent concerns over the worsening of the shipbuilder's financial health
could have a negative impact on its corporate value," a group official said.
Market watchers viewed Hanwha's decision as hinting it may request KDB to delay
the signing of a formal contract.
In response to Hanwha's decision, KDB said it would review all options once
Hanwha's proposal is officially delivered.
"It is hard to believe that Hanwha's financial situation has worsened after the
signing of the preliminary deal and there is no change in our commitment to carry
out the deal as agreed," a KDB official said. "We will clarify our position after
going over Hanwha's proposal."
KDB has maintained its stance that it will fix the sale price of Daewoo
Shipbuilding after the conclusion of the formal deal without a due diligence on
Dec. 29 and select a new preferred bidder if the formal deal falls through.
Affected by a credit squeeze sparked by the global financial turmoil, Hanwha is
reportedly having difficulties raising the money needed to buy Daewoo
Shipbuilding & Marine Engineering.
KDB didn't disclose the sale price, but industry sources estimate that the group
offered over 6.5 trillion won (US$5 billion) for the stake.
Daewoo Shipbuilding was rescued from a near collapse by its creditors through a
debt-for-equity swap in 2000.
ksnam@yna.co.kr
(END)