South Korean shipbuilding giant Hanwha Marine (formerly Daewoo Shipbuilding) has officially acquired Philly Shipyard, a major U.S. commercial shipyard, marking Hanwha Marine as the first Korean shipbuilder to enter the U.S. market, demonstrating its expansion ambitions in the global shipbuilding industry.
$100 million! Hanwha Marine and Hanwha Systems jointly acquire Philly Shipyard
On June 20, Hanwha Group announced that it had signed a contract to acquire 100% of the shares of Philly Shipyard. Hanwha Systems and Hanwha Marine will jointly invest in the acquisition for US$100 million (approximately RMB 726 million). At the same time, Philly Shipyard became the first U.S. shipyard to be acquired by a Korean company.
With this acquisition, Hanwha Group has established a bridgehead for its full-fledged entry into the U.S. merchant marine and defense markets. Philly Shipyard, located in Philadelphia, Pennsylvania, USA, is a subsidiary of Norway's Aker Group, a world-renowned offshore wind and energy giant. Aker Capital holds a 67.64% stake in the Philadelphia shipyard and is the largest shareholder of the shipyard; JPMorgan Chase & Co. and Goldman Sachs Group Inc. hold 11.51% and 6.34% of the shares, respectively, making them the second and third largest shareholders.
South Korean industry insiders say Hanwha Marine's acquisition of Philly Shipyard is the first step in expanding its business in the country. According to the Jones Act (commonly known as the Jones Act) passed by the U.S. government in 1920, ships transporting goods between U.S. ports must be manufactured in the U.S. and registered in the U.S.; At least 75% of the ownership of the vessel is owned by U.S. citizens; The crew must be U.S. citizens. In contrast, most countries, including South Korea, have passed bills that allow the country to have domestic inter-port transportation authority and limit it to ships registered in the relevant country, but the United States has made it clear that it will be "built in its own country." At the same time, the requirements are different according to different ship types, and the relevant regulations for ships used by the army are more stringent.
Philadelphia, where the Philly shipyard is located, is the embryonic area of the U.S. Navy, adjacent to the world's largest naval base, the core base of the U.S. Navy, and the home of the Naval Noncommissioned Officer School. The shipyard's core business is not only the construction of merchant ships, but also the undertaking of ship construction and maintenance orders from government agencies, including the military. The shipyard is one of the few commercial shipyards in the U.S. capable of building medium to large ships. Since 2003, more than half of all Jones Act ocean-going vessels have been built and delivered by Philly Shipyards, including container ships, product tankers and crude oil tankers.
In November 2018, Philly Shipyard delivered Matson Shipping's first Aloha-class 3,600TEU container ship, the Daniel K. Inouye, the largest container ship ever built on the U.S. mainland.
In addition to merchant ships, Philly Shipyard also has a track record of shipbuilding in various fields such as offshore wind power installation vessels and official vessels. In 2020, Philly Shipyard received an order from the United States Maritime Administration (MARAD) for 2+3 National Security Multi-Mission Vessels (NSMV); In 2021, it signed a contract for the construction of 1+1 Jones Act rip ship with Great Lakes Dredge & Dock (GLDD), a leading dredging company in the United States, which is the world's first US-flagged rubble that meets the requirements of the US Jones Act.
In July last year, US President Joe Biden personally attended the groundbreaking ceremony of the Acadia, the first rubble ship built by Philly Shipyard for GLDD, to cut steel plates. The Acadia will serve U.S. offshore wind farms, protecting the submarine foundations and cables of offshore wind turbines.
With the largest shipyard in the U.S., Hanwha Marine aims to enter the U.S. military market
Commenting on the acquisition, Hanwha Marine said that it plans to diversify its revenue by securing overseas production bases. Philly Shipyard can further enhance its dominant position in these areas by expanding its order book to the advantageous medium oil tanker and container ship segments. In addition, Philly Shipyard has the largest shipyard in the U.S., and is expected to be used as a base for building ships and performing MRO (repair, maintenance, and operation) when Hanwha Systems, Hanwha Marine, and Hanwha Marine enter the U.S. marine market.
At the same time, Hanwha Solutions hopes to collaborate with Philly Shipyard in the development of private merchant ships that can sail autonomously. Based on the state-of-the-art marine system technology, such as ECS (Integrated Control System) and IAS (Ship Automation Control System), which are intelligent ship solutions related to merchant ships and ship systems, it is expected to create synergies with a wide range of merchant ship types.
"The acquisition of Philly Shipyard by Hanwha Solutions and Hanwha Marine will create business synergies that will lead the global marine and defense markets, beyond the Middle East, Southeast Asia, and Europe, and expand their export footprint to the U.S. market, securing new growth drivers," said Yu Sung-cheol, CEO of Hanwha Solutions. ”
As early as February last year, Hanwha Group's Acquisition Task Force (TF), which promoted the acquisition of the former Daewoo Shipbuilding, said at a symposium held by Daewoo Shipbuilding employees that Hanwha Group is considering acquiring a shipyard in the U.S. to build military products and offshore wind power installation vessels after completing the acquisition of Daewoo Shipbuilding, so that the new company can create synergies with Hanwha Energy, Hanwha Solutions, and other LNG and offshore wind businesses. According to the task force, Hanwha Group's acquisition of Daewoo Shipbuilding will promote the new company's strategy of working closely with the group's other subsidiaries for joint growth. The acquisition of a shipyard in the United States was to obtain orders for the local military industry in the United States and orders for offshore wind power equipment.
In October last year, Hanwha Marine sent an acquisition mission to Philly Shipyard. Prior to this, Hanwha Marine had already coordinated the acquisition with Philly Shipyard.
Commenting on the acquisition, the Korean industry believes that Hanwha Marine does not want to build ships alone, but rather considers synergies with the military business.
It is reported that Hanwha Marine's acquisition of Philly Shipyard was financed through a paid capital increase. On August 23 last year, Hanwha Marine Board of Directors held a meeting and approved a capital increase of approximately 2 trillion won ($1.5 billion), of which approximately 900 billion won ($670 million) will be used for facility investment and M&A (M&A) to meet global security needs and ensure the competitiveness of the defense industry, including the development of cutting-edge technologies such as unmanned ships and the construction of overseas production bases. In other words, in order to tap into the global maritime defense market, centered on the U.S. and Europe, Hanwha Marine will build the "Super Gap Defense Industry" infrastructure.