KSOE makes preliminary bid to acquire controlling stake of STX Heavy Industries

KSOE, the intermediate sub-holding company of HD Hyundai, submitted a letter of intent to buy 47.81 percent of STX Heavy Industries from its largest shareholder Pinetree Partners, a local private equity firm.

A liquefied petroleum gas carrier built by Hyundai Mipo Dockyard, which is 42.4 percent owned by Korea Shipbuilding & Offshore Engineering (KSOE) [KSOE]

Korea Shipbuilding and Offshore Engineering (KSOE) made a preliminary bid to acquire a controlling stake of STX Heavy Industries, a local ship engine maker.

KSOE, the intermediate sub-holding company of HD Hyundai, submitted a letter of intent to buy 47.81 percent of STX Heavy Industries from its largest shareholder Pinetree Partners, a local private equity firm, according to local media reports Thursday.

Pinetree Partners acquired 66.81 percent of STX Heavy Industries in 2018 at the price of 98.7 billion won ($75.5 million), which shrank to the current 47.81 percent after block deals last year.

The market cap of STX Heavy Industries stood at 198.1 billion won on Friday.

“KSOE will be able to afford the cost of acquisition with its cashable assets,” said Kang Kyung-tae, analyst at Korea Investment and Securities.

“The goal of the takeover deal will be expanding its share in the growing ship engine equipment market,” explained Kang.

According to Kang, Hyundai Heavy Industries, a shipyard 78.02 percent owned by KSOE, has an engine production capacity of 12 million horsepower a year, and STX Heavy Industries’ annual capacity stood at 1.3 million.

Following the media reports, STX Heavy Industries’ share price skyrocketed on the Kospi bourse on Friday morning by nearly 30 percent.

STX soared 29.86 percent to reach 7,480 won right after the market opening, before closing at 6,980 won.

“We believe that the acquisition will help meet the growing demand for ship engines, and therefore participated in the preliminary bidding,” said a spokesperson for KSOE. “By combining Hyundai Heavy Industries’ engine technology, we will be able to extend our line-up into small- and mid-sized engines.”

Aside from KSOE, potential bidders include HSD Engine and an unnamed overseas company, according to media reports.

STX Heavy Industries will choose a preferred bidder next February after the final bidding, and the stock purchase agreement is expected to be closed in the first quarter of next year.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]