HD KSOE Buys Controlling Stake in Engine Manufacturer STX
South Korea’s largest shipbuilding group, HD Korea Shipbuilding & Offshore Engineering is strengthening its competitive position through the acquisition of a controlling position in STX Heavy Industries, the world’s third-largest manufacturer of marine engines. The division of Hyundai emerged as the winner in a bidding contest that launched in December 2022 for the engine manufacturer.
Under the terms of the agreement announced on Monday, HD KSOE will acquire 6.5 million shares of STX Heavy Industries from Pinetree Partners, a private equity group that acquired control of the engine manufacturer from STX Group in 2018. In addition, HD KSOE will help to recapitalize STX Heavy Industries buying an additional approximately 5.4 million shares from a new issue. The total transaction is being valued at approximately $65 million.
HD KSOE is reported to have won a three-way bidding that had been narrowed to itself along with Hanwha Group and another private equity company. HSD Engine Co., formerly known as Doosan Engine, had also been reported to be in the bidding before it was sold to Hanwha, which later withdrew from the bidding. Pinetree announced plans in 2022 to sell its remaining interest in STX Heavy Industries.
“Combining HD Hyundai Heavy Industries’ engineering technology to STX Heavy Industries’ eco-friendly engine technology will make us gain momentum in the fast-growing demand for clean technology,” an official of HD KSOE told the Korean media.
STX specializes in manufacturing low-speed marine diesel engines, as well as dual-fuel engines used by liquified natural gas carriers. The company has a licensing agreement with MAN Energy Solutions. The company has also developed turbocharging technologies for engines.
KSOE looks to ensure its near-term supply of engine manufacturing capacity to meet the company’s strong orderbook for newbuilds and especially LNG carriers. The company also said it looks to expand STX’s production capacity to meet demand.
The acquisition also gives them critical expertise in small and medium engines and engine manufacturing that Hyundai looks to leverage as part of its overall growth strategy. The company has announced plans to expand the international market for its HiMSEN mid-sized engines for larger ships as it also looks to build leadership in next generation engines designed for the emerging alternative fuels.
The acquisition is also a competitive response to Hanwha’s entry into shipbuilding with the acquisition of Daewoo Shipbuilding and Marine Engineering. Hanwha sought to consolidate its competitive position with the acquisition of HSD Engine. Going forward, analysts predict that HD and Hanwha will increasingly be competing for naval shipbuilding contracts.