K Shipbuilding Co., once a rising star in South Korea’s shipbuilding industry under the STX Group, is returning to the auction block – this time with ambitions of becoming a key player in the lucrative warship maintenance, repair and overhaul (MRO) segment.
The shipbuilder’s private equity owners – a consortium of Seoul-based KHI Investment and UAMCO, a domestic bad bank – have chosen PwC Korea, also known as Samil PwC, as the sale lead manager, people familiar with the matter said on Wednesday.
Samil saw off rivals EY Hanyoung and Deloitte Anjin, both of which had past involvement in restructuring K Shipbuilding, then known as STX Offshore & Shipbuilding Co.
The sellers are aiming to select a preferred buyer by the end of this year, sources said, with preliminary due diligence by potential investors already under way and information memoranda set to be distributed in September.
FORMERLY STX
Founded in 1967 as Dongyang Shipbuilding and acquired by STX in 2001, the shipyard enjoyed a brief stint as the world’s fourth-largest by order backlog.
However, the 2008 global financial crisis triggered a prolonged decline, culminating in court receivership and a sale to the KHI-UAMCO consortium in 2021.
Now, with a tailwind returning to the global shipbuilding sector, the owners are seeking to recover their investment.
The asking price is around 500 billion won ($360 million), based on a price-to-book multiple of 1.2 to 1.5 times – a discount, industry watchers say, when compared with valuations applied to peers such as Daehan Shipbuilding Co., which was priced using a PBR of 4.58.
UNTAPPED POTENTIAL IN WARSHIP MRO
Yet beyond financials, it is K Shipbuilding’s untapped potential in naval maintenance and repair that has piqued buyer interest.
“The next owner is likely to be a company with ambitions in the MRO segment for military vessels,” said a Seoul-based investment banker familiar with the deal.
Although K Shipbuilding has not yet entered the defense MRO market, its location in Jinhae, South Gyeongsang province – within the perimeter of US missile defense systems – offers a strategic advantage, analysts said.
Industrial conglomerates and mid-sized manufacturers looking to diversify into naval services are said to be among the suitors.
Analysts said any buyer of K Shipbuilding could enjoy synergy by seeking bolt-on acquisitions of MRO-specialized shipyards in Hawaii and other key US locations to reinforce post-acquisition growth.
“Shipbuilding is cyclical, but MRO offers recurring revenue and a hedge against downturns,” said an industry executive.
SURPRISE WIN FOR PWC KOREA
The mandate win is also a coup for Samil PwC.
Led by veteran turnaround specialist Hwang In-chan, Samsung PwC is said to have impressed the sellers with a proposal focused less on historical restructuring and more on K Shipbuilding’s future business potential.
The KHI-UAMCO consortium is offering a 99.58% stake in K Shipbuilding, including 49.79% owned by KHI, an investment firm specializing in small and medium-sized M&As.
The KHI-led consortium acquired a 95% stake in K Shipbuilding for 250 billion won in 2022.
By Jong-Kwan Park
pjk@hankyung.com
In-Soo Nam edited this article.
