Hyundai Samho Heavy says no delay to 2022 IPO

South Korea's Hyundai Samho Heavy Industries Co. this week reaffirmed its plan to go public by the end of this year, as agreed with its pre-IPO investor IMM Private Equity. 

Ka Sam-hyun, vice chairman and CEO of Korea Shipbuilding & Offshore Engineering Co. (KSOE), told institutional investors in a meeting on Jan. 18 that the IPO of its subsidiary Hyundai Samho was "a promise it must fulfill within the year," according to industry sources.  

Taking Hyundai Samho public by the end of this year was a condition put forward by Seoul-based IMM PE in 2017 for injecting 400 billion won into the troubled shipbuilder.

Otherwise, Samho has to make a significant operating profit to pave the way for the private equity firm's exit with decent gains. But it posted an operating loss of 212.5 billion won ($179 million) in the first nine months to September, 2021.

If the shipbuilder fails to meet the conditions, it has to pay a penalty worth about 200 billion won, or part of the investment principal plus a 9.5% interest rate per annum.

IMM holds a 15.15% stake in Samho, followed by KSOE with an 80.54% stake.

If Hyundai Samho goes public within the year, it will join nine other listed companies under Hyundai Heavy Industries Group.

Hyundai Oilbank Co, a refinery, last month submitted an IPO application with an aim to make a trading debut in the first half of this year. Hyundai Heavy Industries was listed on the Korea Exchange in September of last year.

CEO Ka's remarks came a week after Hyundai Heavy's plan to take over cash-strapped Daewoo Shipbuilding & Marine Engineering Co. (DSME) was blocked due to the opposition from the European Commission on Thursday.

But investors welcomed the collapse of the proposed deal, saying Hyundai Heavy saved as much as 6 trillion won ($5.1 billion) it otherwise would have spent to acquire the debt-laden competitor.

SMOOTHER SAILING

Just like other domestic shipbuilders, Hyundai Samho’s earnings have taken a hit by the soaring prices of steel plates used in shipbuilding.

But its growing order backlog for eco-friendly ships, alongside replacement orders, are expected to drive over 10% annual sales growth for its parent company KSOE through 2025, the sources said, quoting CEO Ka.

KSOE is the holding company of Hyundai Heavy Industries Group’s three units –Hyundai Heavy Industries Co., Hyundai Mipo Dockyard Co. and Hyundai Samho Heavy.

The holding firm is aiming to receive $1.7 million worth of new orders this year, up 17% in 2021 when it secured 50% more orders than it had targeted.

Ka said that thanks to the popularity of eco-friendly vessels, the life cycles of ships have shortened to 15 years from the previous 20-30 years, creating new orders.  

Write to Jung-hwan Hwang at jung@hankyung.com
Yeonhee Kim edited this article.