Shareholders of Hyundai Heavy Industries approved the company's plans to merge with Daewoo Shipbuilding & Marine (DSME) on Friday. The approval comes despite opposition that saw workers at Hyundai Heavy Industries run a series of strikes over the last month.
Hyundai Heavy Industries agreed the $1.6 billion deal with Korea Development Bank in March. The bank is DSME's largest shareholder, with a controlling 55.7 percent. Under the deal, DSME will be split into a subholding company and a reorganized Hyundai Heavy Industries that will take over its shipbuilding and offshore businesses.
Unions claim that the split will mean that Hyundai Heavy Industries will inherit massive debt, leading to job cuts.
"The split-up plan is aimed at enhancing Hyundai Heavy's capabilities and value through the merger with Daewoo Shipbuilding and leapfrogging forward once again," Hyundai Heavy President and Chief Executive Han Young-seuk said at the shareholders' meeting.
If the split is completed, Korea Shipbuilding & Offshore Engineering (KSOE) will be set up under holding company Hyundai Heavy Industries Holdings Co and will focus on research and development and investment. Daewoo Shipbuilding will operate under KSOE.
Hyundai Heavy Industries has said that it will guarantee job security, but Yonhap reports that the union has said it will seek legal action to nullify the shareholders' decision, claiming the meeting didn't follow proper procedure as the venue was changed at the last moment as a result of the sit-in.
The Korea Employers Federation (KEF) urged the union to collaborate with the company to counter competition from China. "Korean shipbuilders have competed with each other to win orders in global markets. Such competition resulted in lower contract prices. An escalating trade war between the United States and China is also a major worry for exporters. At this critical juncture, the merger will help the country's biggest shipbuilder regain profitability," the KEF said in a statement.
Hyundai Heavy Industries and DSME combined have about 20 percent of the world's orderbook backlog. If the takeover goes ahead, Hyundai Heavy Industries Holdings will encompass four shipbuilding companies: Hyundai Heavy Industries, Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard and DSME.
