Hyundai Heavy Industries has barely succeeded in dividing itself for the acquisition of Daewoo Shipbuilding & Marine Engineering (DSME), overcoming strong opposition from its unionized workers. Now the company is facing resistance from the DSME labor union in carrying out due diligence.
Hyundai Heavy Industries and Korea Development Bank (KDB), the main creditor of DSME, have launched a due diligence team consisting of some 20 from the two companies. The team visited Okpo Shipyard on Geoje Island for on-site due diligence work on June 3. But they could not enter the shipyard due to a blockade set up by the DSME labor union.
The team planned to carry out due diligence at the shipyard from June 3 through June 14. "Unless the sale plan for DSME is withdrawn, no one at DSME can meet the due diligence team," said Ha Tae-joon, policy chief of the labor union.
Even though the due diligence team will continue to make attempts to enter the dockyard until June 14, it is unclear whether they can enter it as scheduled as the unionists are determined to block the team. Back in 2008, the DSME labor union blocked due diligence teams sent by such business groups as Hanwha Group, POSCO and GS Group that were interested in acquiring the company. At the time, Hanwha Group was selected as the preferred bidder, but the deal was delayed due to labor union's resistance. Then, the global financial crisis broke out, aborting Hanwha’s takeover attempt.
On-site due diligence is an essential process in taking over a company. However, industry analysts are raising the possibility of Hyundai Heavy Industries and KDB skipping the due diligence work to avoid a clash with the labor union since they are well-informed of the DSME situation.
In the meantime, the two companies created by the division of old Hyundai Heavy Industries -- Korea Shipbuilding & Offshore Engineering (KOSE) and a new Hyundai Heavy Industries – were officially inaugurated on June 3. KOSE is a technology-oriented company that will manage and support subsidiaries, make investment decisions and conduct R&D on future technologies. Newly established Hyundai Heavy Industries is responsible for design, sales and production.