The next home of STX Heavy Industry has been decided! South Korean shipbuilding giants add new impetus

After the withdrawal of Hanhua Group, the acquisition of STX Heavy Industries by South Korea Shipbuilding Offshore has become a foregone conclusion. HD Hyundai Group, which owns the world's largest marine engine manufacturer HHI-EMD, has added new impetus to enter the environmental protection ship market.

On March 2, the sale of STX Heavy Industries, a South Korean marine engine manufacturing enterprise, began to formally bid. HD Hyundai Group (formerly Hyundai Heavy Industries Group), the shipbuilding business holding company, Korea Shipbuilding Offshore, became the only enterprise to participate in the formal bid. This also means that South Korea Shipbuilding Marine has naturally been selected as the preferred negotiation object for the sale of STX Heavy Industries.

In December last year, four to five enterprises, including South Korea Shipbuilding Ocean, South Korea's military giant Hanhua Group, and South Korea's private equity fund (PEF) operating company Socius, participated in the pre-bid for the sale of STX Heavy Industry shares. The acquisition target was 47.81% of STX Heavy Industry shares held by the Korean private equity fund operating company PineTree Partners, with an estimated acquisition amount of 100 billion won (about 79 million dollars). After conducting field due diligence on STX Heavy Industries, the enterprises participating in the pre-bid will select the preferred negotiation object for the sale of STX Heavy Industries shares in the first quarter of this year through formal bidding, and complete the signing of the share purchase and sale contract (SPA) with PineTree Partners. After the acquisition, it will become the largest shareholder of STX Heavy Industry.

According to relevant sources in the Korean industry, although companies such as Hanhua Group and Socius have also demonstrated acquisition intentions during the previous pre bidding and on-site due diligence stages, making the acquisition battle a chaotic situation. However, in the end, except for South Korea Shipbuilding Offshore, other companies did not participate in the formal bidding, which also means that South Korea Shipbuilding Offshore has in fact been identified as the acquirer of STX Heavy Industries.

It is reported that Hanhua Group once showed great interest in the acquisition of STX Heavy Industry, but decided to withdraw from the formal bid for the sale of STX Heavy Industry shares after signing the agreement of intent (MOU) to acquire 33% shares of HSD Engine, a South Korean marine engine manufacturer, on February 16 this year.

STX Heavy Industries has certain advantages in marine diesel engines, DF dual-fuel engines, LNG engines, LPG engines and other fields. If South Korea Shipbuilding Offshore successfully acquires STX Heavy Industries, its three shipbuilding subsidiaries, including Hyundai Heavy Industries, Hyundai Sanhu Heavy Industries and Hyundai Weipu Shipbuilding, will have synergies with the engine business.

It is reported that South Korea Shipbuilding Offshore acquired STX Heavy Industries in order to combine the engine technology owned by Hyundai Heavy Industries Engine and Machinery Division (HHI-EMD) with the technology owned by STX Heavy Industries, enrich the product spectrum of small and medium-sized engines, provide customers with diversified product choices, and create synergy with HD Hyundai Group's shipbuilding business to further improve its comprehensive competitiveness.

HHI-EMD is the world's largest marine engine manufacturer, mainly producing large and medium-sized marine engines. It is the world's largest ship supporting supplier for the number of marine main engines delivered and the total power. Its sales account for 17% of modern heavy industry, and it is second only to the shipbuilding and marine industry division, which accounts for 77% of sales in the company.

According to the International Ship Network, STX Heavy Industry, a subsidiary of the former STX Group, was established in February 2004, mainly engaged in marine engines, land power generation engines and ship supporting businesses. After the dissolution of STX Group, STX Heavy Industries entered the restructuring process in August 2016.

In March 2018, STX Heavy Industries selected PineTree Partners and GlobalSeAH, the South Korean private equity fund (PEF) operating companies, as the preferred bidders. Subsequently, PineTree Partners acquired its mainframe supporting business unit at a price of 98.7 billion won (about 92.6 million US dollars). In addition, GlobalSeAH acquired the business unit of STX Heavy Industry Platform at a price of 16.1 billion won (about US $15 million).

Four years after acquiring the supporting business department of STX Heavy Industries, PineTree Partners decided to sell its operating shares. It is reported that Pinetree Partners will sell 47.81% of the shares of STX Heavy Industries and select Samjung KPMG as the competent authority for the sale of shares of STX Heavy Industries.

With the recovery of shipbuilding market in recent years, the financial structure of STX Heavy Industry is improving. Since the large-scale deficit in 2018, STX Heavy Industry has been in deficit except for 2020. However, since 2022, STX Heavy Industry has achieved profits for three consecutive quarters. At the end of the third quarter of last year, the company's orders in the field of engine equipment increased by 16% year-on-year. Last November, STX Heavy Industries also signed a contract for the supply of marine engines of 13.9 billion won (about US $10 million) with Chinese shipbuilding enterprises. At the same time, STX Heavy Industries is also conducting research and discussion on the construction of facilities and equipment that can produce newly developed environment-friendly engines.

South Korea Shipbuilding Offshore said that the acquisition of STX Heavy Industries was to further expand the capacity of marine engines. The person from the company said: "This is a strategic measure to effectively respond to the growing demand for marine engines. After the acquisition, combining the engine technology owned by Hyundai Heavy Industry with the technology owned by STX Heavy Industry can not only promote the diversification of small and medium-sized engine products, but also produce synergy with HD Hyundai Group's shipbuilding business to further improve its comprehensive competitiveness."