Hyundai Heavy Industries Co. has been split into two with newly established Korea Shipbuilding & Offshore Engineering (KOSE) set to become the parent of South Korea’s two largest shipbuilders after it brings in contentious Daewoo Shipbuilding & Marine Engineering (DSME) under its arm.
KOSE held a board of directors meeting on Monday and appointed Kwon Oh-gap, vice chairman of Hyundai Heavy Industries, as its new chief executive. The board also approved other issues such as the site of its headquarters.
KOSE, the remaining corporation from the split-up and Hyundai Heavy Industries, newly created entity, each applied for registration with Ulsan District Court on Monday.
KOSE will operate as a technology-focused company that plays the role of a control tower of shipbuilding affiliates and that integrates research and development and engineering functions.
The split-up and the launch of KOSE have partly changed corporate governance structure of Hyundai Heavy Industries Group. KOSE is now the sub-holding company of Hyundai Heavy Industries Holdings Co. that is in charge of shipbuilding and offshore businesses while another sub-holding company Hyundai Oilbank Co. is responsible for energy business. There are also subsidiaries for industrial machinery and other services.
Previously, Hyundai Heavy Industries managed Hyundai Samho Heavy Industries Co. and Hyundai Mipo Dockyard Co. as its subsidiaries, playing the role of both a sub-holding company and shipbuilding entity. After the split-up, KOSE will become the sub-holding company of the group and manage three shipbuilding subsidiaries – Hyundai Heavy Industries, Hyundai Samho Heavy Industries, and Hyundai Mipo Dockyard.
Under agreement between Hyundai Heavy Industries Group and its main creditor Korea Development Bank, KOSE will have four shipbuilders as its subsidiary once it completes acquisition of DSME.
Hyundai Global Service Co., service company under the shipbuilding unit, will remain as a subsidiary of Hyundai Heavy Industries Holdings. Once the holding company sells its full stake in Hyundai Global Service to sub-holding company KOSE, however, Hyundai Global Service will become the grandson unit of the holding company, or a subsidiary of a subsidiary, allowing Hyundai Heavy Industries to get out of fair trade regulation that bans unfair favoring of affiliates in business transactions.
The chief executive of Hyundai Global Service is Chung Ki-sun, vice president of Hyundai Heavy Industries Holdings and eldest son of Chung Mong-joon, largest shareholder of the holding company and chairman of Asan Foundation.
KOSE, meanwhile, plans to come up with a dividend scheme and inform shareholders of it. It will be the first payout since 2013 as Hyundai Heavy Industries was unable to give out dividends as it struggled from huge losses in 2014, 2015, and 2018 due to sluggish shipbuilding industry.