Hanwha`s Bid for Daewoo Shipbuilding Collapses

The high-profile deal to sell Daewoo Shipbuilding and Marine Engineering to the Hanwha Group collapsed yesterday due to a disagreement over payment conditions.

At a board meeting yesterday, the state-run Korea Development Bank, Daewoo`s largest shareholder, decided to halt negotiations with Hanwha.

The bank said it scrapped the deal because Hanwha insisted on paying the acquisition price of 6.3 trillion won (4.58 billion U.S. dollars) in installments without submitting a detailed funding plan the bank asked for.

The country’s ninth-largest conglomerate was chosen the prime bidder for Daewoo in October last year, but Hanwha deferred the final contract to Jan. 30 from Dec. 29 last year due to difficulty in raising funds in the wake of the global financial crisis.

The bank has offered to help raise funds by buying Hanwha’s assets, but the conglomerate has proposed to buy 30.2 percent of the 51-percent stake in Daewoo in advance. The bank refused Hanwha`s proposal to avoid allegations of preferential treatment.

The collapse of the deal is expected to trigger a legal battle between the bank and the conglomerate over the fate of 300 billion won (218.5 million U.S. dollars) that Hanwha put up for the deal.

A Hanwha source said, “Korea Development Bank is more responsible for the breakup of the deal because opposition from the Daewoo union held up the due diligence on the shipbuilder. We will take legal action to recover the 300 billion won.”

legman@donga.com abc@donga.com