Korea Development Bank said it has decided to give the Hanwha Group an extra month to complete its purchase of the world's third-largest shipbuilder.
As it becomes increasingly likely that the biggest merger and acquisition (M&A) story of the year surrounds a deal that never happened, creditors of Daewoo Shipbuilding & Marine Engineering are saying they could be a little more patient. The state-run Korea Development Bank (KDB) said it has decided to give the Hanwha Group, which it named as the preferred bidder for Daewoo in October, an extra month to complete its purchase of the world's third-largest shipbuilder.
Hanwha signed a preliminary deal last month to buy a 50.4 percent stake in Daewoo for an estimated $4.6 billion, with full payment to be made by late March, and had previously agreed to sign a final contract by Monday.
However, KDB found itself in a bitter standoff with its preferred bidder after Hanwha proposed to delay payment for the acquisition due to funding constraints.
In extending the deadline for Hanwha, the KDB demanded the conglomerate present a detailed plan for financing the deal, which may include the unloading of assets such as Hanwha Resort, Galleria Department Store, the group's headquarters in Janggyo-dong and its shares in Korea Life Insurance.
Hanwha recently said it will sell its 21.36 percent stake in Korea Life Insurance, an unlisted company, to raise more funds to splurge on Daewoo.
Industry watchers believe that KDB will seek to hold some of Hanwha's real estate or shares in subsidiaries as security and eventually agree to phasing the payments to protect itself from the group backing out.
Under the terms of the memorandum of understanding (MOU) signed (between the two sides), the formal contract must be signed Monday,'' said Jung In-sung, vice president of KDB.
However, considering the critical impact of the successful completion of the deal on the domestic economy, we concluded that we can delay the signing of the contract until Jan. 30,'' he said.
Although the KDB fell short of questioning the sincerity of Hanwha's intentions to acquire Daewoo, Jung said the bank will look for a new buyer if the company fails to ink a deal by Jan. 30 and stressed that the payment must be completed by the end of March as agreed upon in the MOU.
We have no plans to tweak the basic framework of the MOU,'' said Jung, indicating that the bank has also rejected Hanwha's request to make the payment in installments.
Hanwha, one of the country's largest family-owned conglomerates, or chaebol, calls chemicals and brokerages its bread and butter but has been looking to expand its business lineup to secure further growth.
Little more than a month after signing the MOU, however, Hanwha demanded the payment to be made in installments or delayed, citing worsening financial conditions.