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DSME sale to Hanwa off

DSME sale to Hanwa off

Seoul:  Korea Development Bank (KDB) has ended talks to sell a majority stake in Daewoo Shipbuilding to South Korea's Hanwha Group amid differences over financial terms, Yonhap news reported on Wednesday.

Shares in Daewoo Shipbuilding & Marine Engineering jumped as high as 9.6 percent and Hanwha Corp extended gains into a fourth consecutive session as investors welcomed the reported failure of the sale.

"We judged that negotiations with Hanwha would be difficult to continue and therefore we decided to seize Hanwha's deposit of 300 billion won ($219.9 million)," the news agency quoted an unnamed source in charge of the sale as saying, referring to the initial amount Hanwha put down for the sale.

KDB spokesman Kim Tae-kyoon said he had no knowledge of the reported collapse of the deal, adding that the bank would hold a news conference on Thursday to explain its position.

Hanwha Group spokesman Ju Cheol-beom said the group would not respond to the report until KDB notified it of a formal decision.

Chemicals-to-brokerage group Hanwha, led by explosive maker Hanwha Corp, was picked in October as the buyer of a 50.4 percent stake in the world's No. 3 shipbuilder.

Hanwha Group hoped to sell assets and raise money from banks and other investors to pay for the deal, but the funding plans hit snags due to deteriorating financial market conditions.

Hanwha had asked KDB, the shipmaker's top shareholder and lead manager of the deal, to delay the payment deadline or receive the amount in tranches, adding that it had yet to study Daewoo's books due to protests by the shipyard's labour union.

KDB agreed last month to delay the sale by one month.

The stake on offer is held by KDB and debt clearer Korea Asset Management Corp.

Sources familiar with the matter said earlier this month that abandoning the deal was the better financial option for Hanwha given the current economic environment, with the costs of absorbing such a large asset likely to be damaging in the long term. [21/01/09]