Hanwha Bids Against Hyundai in Contest to Buy STX Heavy Industries

South Korea’s Hanwha Group appears to be moving quickly to consolidate its position in the shipbuilding industry with reports that it joined the bidding for marine engine manufacturer STX Heavy Industries. The expression of interest in the engine manufacturer reportedly came two days before Hanwha completed the agreement to recapitalize Daewoo Shipbuilding & Marine Engineering (DSME) assuming control from the Korea Development Bank (KDB).

The largest shareholder of STX Heavy Industries, a private equity firm named Pinetree Partners, announced earlier this year that it would sell its 47.8 percent stake in STX through a tender process. The first round, expressing interest in the company was due by December 14. STX Heavy Industries will choose a preferred bidder by February 2023, and after the final bidding, a stock purchase agreement is expected to be completed in the first quarter of 2023.

Based on a current market valuation of approximately $160 million, the implied value of the shares of STX being sold is approximately $78.7 million. Reports that Hanwha has entered the bidding for STX sent the price of the company’s stock soaring as much as 15 percent in Korea.

Hanwha did not confirm that it was interested in STX, but the Korean media is reporting that Hanwha has begun a due diligence for the engine business. Hanwha’s bid would place it in competition with HD Hyundai, the parent of Korea Shipbuilding & Offshore Engineering, which announced in mid-December that it was bidding for the shares of STX. Other bidders are believed to include several private equity funds.

Hanwha, Korea’s seventh largest conglomerate said it planned to integrate DSME and expand its capabilities after the pending deal closes in early 2023. KDB had previously said the shipyard required private management and investments to expand its capabilities and technologies to meet the emerging challenges in shipbuilding.

DSME is said to be one of the largest customers of STX along with the former STX shipyards which were relaunched in 2021 as K Shipbuilding. DSME reportedly relies on STX and several other engine manufacturers. STX builds a line of diesel marine engines as well as having grown its position in dual-fuel engines which are experiencing a rapid rise in demand. STX is reported to be one of only three Korean manufacturers of low-speed diesel engines, including Hyundai’s internal capability, and a third independent company, HSD Engine.

Industry analysts believed it was inevitable that Hanwha and Hyundai would emerge as rivals in the industry.  

Hyundai currently has an engine manufacturer within its group but said it was interested in STX to meet the rising demand for engines as part of its strong shipbuilding orderbook.