“We are very sorry for the decision which the European Commission made based on national selfishness,” said Lee Dong-gull, chairman of state-run Korea Development Bank (KDB) regarding the European Commission’s disapproval of a merger between two Korean shipbuilding giants - Korea Shipbuilding & Offshore Engineering (KSOE) under Hyundai Heavy Industries Group and Daewoo Shipbuilding and Marine Engineering (DSME).
Chairman Lee stressed that Hyundai Heavy Industries Group should respond by filing a lawsuit against the EU Commission.
“I am (feeling) very bad about the EU’s disapproval in light of the fact that China and Singapore unconditionally endorsed the marriage between the two Korean shipbuilders,” Chairman Lee said in response to the EU Commission’s decision to reject the two companies’ business combination in an online New Year press conference on Jan. 27.
“I think it would be nice for Hyundai Heavy Industries to fight this out in court, including filing lawsuits against the European Commission for damages,” Chairman Lee added.
“The three domestic shipbuilders competed too blindly and recklessly in all aspects, so their ship prices dropped,” Chairman Lee said.
EU shipowners and authorities wanted to maintain the current structure as they considered falling ship prices caused by the price war and even though they did not say as much, high patent fees for liquefied natural gas (LNG) ships, I think.”
In addition, Chairman Lee said he will lay out a comprehensive plan after completing management consultations scheduled for early March on follow-up management and sale plans following the failure of the merger between KSOE and DSME.
“We are conducting management consulting to improve Daewoo Shipbuilding’s constitution and enhance its competitiveness,” he said.
“After the consulting results are released, we will come up with mid- to long-term management measures after discussing the matter with government authorities and those concerned.”
“Public funds which KDB injected into DSME were money that KDB earned on its own but did not include any taxpayers’ money,” Lee said with reference to public funds injected into DSME.
“So far, DSME has received a total of 4.2 trillion won in public funds from the government and 2.6 trillion won of the funds came from KDB. There will be no additional support for DSME if there is no possibility of DSME’s management normalization.”
Regarding Edison Motors’ acquisition of Ssangyong Motor, Chairman Lee said, “I am concerned that it seems that Edison Motors is adopting the leveraged buyout (LBO) method, typically the worst method among methods for mergers and acquisitions.”
An LBO is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition.
The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. By using the LBO method, an acquiring company can take over a blue-chip company with small capital.
“A rehabilitation plan for Ssangyong Motor will focus on how to pay off the troubled Korean automaker’s existing debts with acquisition funds,” he said.
“The fact that we agreed on a rehabilitation plan mapped out by Edison Motors does not mean that we agreed on Edison’s business plan.”
Meanwhile, with respect to some presidential candidates’ pledge to relocate KDB Headquarters to Busan from Seoul, Chairman Lee did not agree with them. “It will be a step back, not a stop forward for progress,” he said.
“Based on five years of my experience, it is necessary for KDB to take care of the whole of the Korean economy from Seoul which is not only the administrative but economic capital of Korea. I blame their idea to relocate KDB Headquarters to Busan on their poor understanding of finance and industry.”
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