World’s biggest shipbuilder to split into four companies

The giant conglomerate Hyundai Heavy Industries has decided to divide its operations and spin off non-shipbuilding amid a prolonged downturn in the sector.

A ship under construction at Hyundai Heavy Industries' shipyard in Ulsan, South Korea. The conglomerate will be split into four separate entities, the company said. Seokyong Lee / The National
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South Korea’s Hyundai Heavy Industries, the world’s largest shipbuilder, is being split, with its non-shipbuilding businesses being spun off to improve management efficiency and competitiveness, the shipbuilder said on Tuesday.

South Korean shipbuilders have been selling non-core assets and slashing jobs to cope with shrinking orders from the oil industry that forced the firms into heavy losses last year. South Korea is home to the world’s three largest shipbuilders – Hyundai Heavy, Daewoo Shipbuilding & Marine and Samsung Heavy Industries.

Under the plan, Hyundai Heavy, which is also home to the biggest shipyard on earth, will be divided into four companies. It will retain core businesses, including shipbuilding, offshore and industrial plant, while three other firms will focus on electro electric systems, construction equipment and robot business, the company said.

Existing Hyundai Heavy stakeholders will be get around 0.75 shares of the company and shares in each of the three other entities.

The spin-off is part of its restructuring plan submitted to creditors.

The three newly created companies will seek listings on the stock market. The company expects the separation to be completed on April 1, 2017.

The news comes just a day after a South Korean shipping company that filed for bankruptcy protection five years ago emerged as the surprise winning bidder for some assets of the collapsed Hanjin Shipping, pipping a bigger rival that is undergoing a creditor-led debt revamp.

Korea Line, the nation’s second-largest bulk carrier, beat Hyundai Merchant Marine to be the preferred bidder for Hanjin’s Asia-US business, a spokesman for the Seoul central district court said. Final sale documents will be signed November 21, according to the court. Shares of Korea Line slumped the most in three years.

A successful acquisition of the assets will mark Korea Line’s entry into the container-shipping business, helping it to challenge the dominance of Hyundai Merchant on the busy Asia-US route. The sale process caps more than two months of turmoil triggered by Hanjin’s bankruptcy filing that underscored the industry’s struggle with weak demand, overcapacity and depressed freight rates.

“This is unexpected,” said Rahul Kapoor, a director at Drewry Financial Research Services in Singapore. “It comes down to price. For the court, it was the price because they need to repay debt.”

Korea Line, which trails Pan Ocean among South Korean bulk-shipping companies, is expanding after exiting from bankruptcy protection, which it filed for in 2011. Bought by the Samra Midas Group in 2013, it operates 29 vessels hauling goods such as iron ore, crude oil and cars.

*Agencies

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