'K Shipbuilding' to Be Resold Through Stalking-Horse Process at Valuation of 900 Billion Won...New Owner to Emerge by Year-End [fnMarketWatch]

[Financial News] United Asset Management Company (UAMCO) and KHI will use a stalking-horse process to resell K Shipbuilding, a mid-sized shipbuilder, and select a preferred bidder by the end of the year. Samil PricewaterhouseCoopers is advising on the sale. Multiple investors are reportedly showing interest.
According to investment banking industry sources on the 10th, UAMCO and KHI plan to receive letters of intent this month and sign a memorandum of understanding with the candidate most likely to complete the transaction. After a full due diligence review and negotiations over the terms of the deal in October, they will sign a conditional investment agreement by the end of the year and conduct an open competitive bid based on that agreement.
The assets being sold are the 99.6% stake in K Shipbuilding held by K Sunshine Holdings, a special-purpose vehicle of UAMCO, and KHI. The price for the existing shares is reportedly in the 600 billion won range. Including the issuance of new shares and corporate bonds, the total transaction value could rise to around 900 billion won, market observers say.
In the previous sale process, Taekwang Group participated alone in a consortium with Oseong Advanced Materials and Green Harbor Asset Management, but the process ended in June without selecting a preferred bidder. The sellers determined that, given the nature of the shipbuilding industry, a strategic investor capable of directly taking responsibility for the business should lead the process.
This time, attention is focused on whether the sale will attract sufficient interest, as the shipbuilding boom coincides with the scarcity of mid-sized shipbuilders whose management control can be acquired.
Following the industry’s restructuring around large shipbuilders, few mid-sized shipbuilders with controlling stakes available on the market remain. The expansion of the eco-friendly vessel and naval maintenance, repair, and overhaul (MRO) markets is also increasing their strategic value.
K Shipbuilding’s performance has also improved. Its first-half revenue reached 683.4 billion won, while operating profit stood at 114.3 billion won, up 15% and 172%, respectively, from the same period a year earlier. Net assets totaled 609.6 billion won at the end of June, a 59% increase from a year earlier, while its debt-to-equity ratio fell to around 160%. Borrowings that previously depended on UAMCO’s credit support are also being repaid sequentially through operating cash flow.
K Shipbuilding is competitive in its core product tanker business and has a high-quality order backlog as well as experience building various types of vessels. Its proximity to Jinhae Naval Base and the presence of a U.S. Navy Fleet Support Unit nearby are also cited as investment points, given the potential to expand into South Korea-U.S. naval vessel MRO projects.
An investment banking industry source said, "K Shipbuilding’s greatest scarcity value is that few mid-sized shipbuilders whose management control can be acquired remain after the restructuring of South Korea’s shipbuilding industry." The source added, "This time, the key to completing the transaction will be whether an SI capable of actually leading the shipbuilding business emerges, rather than the price alone."
[email protected] Kang Gu-gwi Reporter