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South Korea shipbuilder Hyundai Heavy eyes stake in rival Daewoo - source

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Reuters SEOUL
By Hyunjoo Jin
SEOUL (Reuters) - South Korea's Hyundai Heavy, the world's biggest shipbuilding group, is interested in buying into second-ranked Daewoo, a person with direct knowledge of the matter said, in what could create an entity controlling over 20 percent of the global market.
The move comes as the worldwide shipbuilding sector recovers from a global economic downturn that led to massive losses, widespread job cuts and, in 2017, a $2.6 billion bailout of Daewoo Shipbuilding & Marine Engineering Co Ltd.
State-funded Korea Development Bank (KDB) owns 55.7 percent of Daewoo, and has said it intends to sell the stake and consolidate the country's three biggest shipbuilders - which includes Samsung Heavy Industries Co Ltd - into two.
The shipbuilding industry accounts for 7 percent of both exports and employment in Asia's fourth-biggest economy.
"Hyundai Heavy held talks to buy the Daewoo stake," said the person, who was not authorised to speak publicly on the matter and so declined to be identified.
The person did not provide further details such as stake size, purchase price or which Hyundai Heavy company would bid.
Hyundai Heavy, Daewoo, Samsung Heavy and KDB declined to comment.
Daewoo shares rose as much as 22 percent on Thursday. Those of Hyundai Heavy Industries Holdings Co Ltd and unit Hyundai Heavy Industries Co Ltd fell about 5 percent on concern about a high purchase price, analysts said.
Meanwhile, the potential for reduced competition pushed Samsung Heavy shares up almost 7 percent.
Hyundai Heavy has submitted a letter of intent to KDB to buy a stake in Daewoo, online news provider Yonhap Infomax reported on Thursday, citing the government.
KDB's stake was worth 2.16 trillion won ($1.94 billion) as of Wednesday's closing stock price, a valuation analysts regard as high.
Hyundai Heavy's workers' union said it will delay a vote on last year's wage deal in protest of a purchase it says could threaten job security. It said it would be "angered" if the shipbuilder ploughed money into buying another big firm having released workers after reporting losses and shrinking orders.
The holding company is set to raise funds for acquisitions through the sale of part of its stake in refiner Hyundai Oilbank Co Ltd to Saudi Aramco for up to 1.8 trillion won.
($1 = 1,116.2000 won)
(Reporting by Hyunjoo Jin; Additional reporting by Joori Roh; Editing by Ju-Min Park and Christopher Cushing)

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First Published: Jan 31 2019 | 10:46 AM IST

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