IMM commits $266m to Korean shipbuilder

According to a statement, HSHI will issue 5.4 million new shares to IMM, giving the private equity firm an 11.8% stake. Parent company Hyundai Heavy Industries (HHI), which currently holds a 94.9% interest, will be diluted to 83.7%. The deal values HSHI at KRW2.5 trillion. The proceeds will primarily be used to pay down debt.

The investment comes as HHI seeks to split the shipbuilding operations from its other businesses. Earlier this month the company created three new entities: Hyundai Construction Machinery; Hyundai Electric & Energy System; and Hyundai Robotics, which will serve as a holding company for the other businesses including HHI under the control of the Chung family.

Korea’s shipbuilding industry has struggled in recent years amid declines in global demand as a result of the global financial crisis. Currently Daewoo Shipbuilding & Marine Engineering (DSME) is fighting to remain afloat until a promised KRW2.9 trillion government bailout comes through. The National Pension Service, DSME’s largest bondholder, recently agreed to a restructuring plan that will see half of the company’s debt converted to equity, with the rest to roll over for another three years. 

Despite the industry’s difficulties, HSHI claims to have seen strong performance recently, reporting revenue of KRW3.9 trillion and operating profit of KRW172 billion for 2016. It received orders for 15 new ships last year, valued at $1.1 billion in total, and earlier this year received a $240 million order for four ships from Russian state-owned shipping company Sovcomflot.

IMM’s deals with Hyundai include the acquisition of Hyundai Merchant Marine’s liquefied natural gas (LNG) business for KRW1.1 trillion in 2014, a few weeks after Hahn & Co. agreed to pay KRW400 billion for the LNG business of competitor Hanjin Shipping.

Currently IMM is investing its third Korea-focused fund, which it closed last year at KRW1.25 trillion. The firm is in the process of exiting its first and second funds, which closed in 2008 and 2012 respectively.

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• Topics
• North Asia
• Industrials
• Expansion
• South Korea
• manufacturing
• IMM Investment