STX France, the Korean Move

Genoa - A secretive but complete visit to the plant was all it took to set off a game of Risk in the global shipbuilding sector. A mission made up of the Korean shipbuilding giant Daewoo’s managers, landed in France a few days ago and made their way through the gate of the Saint Nazaire facility, owned by STX France. The French media say that the Koreans carried out a detailed reconnaissance tour of the French shipyard, which has officially been on sale for almost a year. Daewoo’s management had documents delivered for review, examined the company’s assets, and inspected its order portfolio and balance sheets - all signs that the Seoul shipbuilder has a strong interest in STX France. But the episode set off a strong reaction in France: Saint Nazaire’s main shareholder is also from South Korea, STX Offshore & Shipbuilding, which was shipwrecked in a sea of debt until it was rescued by its main creditor, the Korea Development Bank (KDB). The Korean bank is also Daewoo’s main shareholder and both French politicians and the shipyard unions were immediately suspicious about the circular sale and buyback operation.

The workers began to worry about employment levels, while French politicians have asked that the State intervene, since it already owns 33.34% of the company’s stock, fearing that the Koreans will act as predators rather than partners, and the shipyard will be their prey. Saint Nazaire builds not only cruise ships, but also military units: for example, it built the Mistral ships for the Russian Navy, which are at the centre of a diplomatic row between Hollande and Putin. France does not want to give up any of its secrets or reveal its biggest orders to the Koreans, who are its direct competitors in this sector, after having won a significant market share in Europe with contracts to build submarines for Germany. And Paris is also concerned because another Korean shipbuilding giant, Samsung, showed interest in STX France in June, but didn’t take the next step of opening official negotiations. In any case, analysts were surprised by Daewoo’s interest and even more so by KDB’s, because after announcing that it wanted to get rid of STX’s international assets (including Saint Nazaire), the bank may now use Daewoo as a vehicle to buy them back. It could be a move intended to raise STX France’s share price. But despite the fact that its order portfolio is in better shape now because of commissions from MSC and the Royal Caribbean Group (six ships plus two options), it will not be easy for Saint Nazaire to find a partner.

It is the fault of the French, who perhaps out of pride, have not welcomed the only real suitor for the marriage, which is Italy’s Fincantieri. At the delivery ceremony of the Britannia to Carnival, Giuseppe Bono, Fincantieri’s C.E.O., sent a message to the Government and to Europe: “We absolutely must proceed with the consolidation of the industry.” Bono knows that to survive, the market needs global giants, and that Fincantieri could wind up a little fish in an ocean of whales. The French have learned from this Korean visit that the only true alternative that can save jobs and guarantee development for the shipyard is the Italian group. But Daewoo’s acquisition of Saint Nazaire would make it possible for the shipyard to acquire new orders, new know-how and skilled labour that could be used in the great challenge of building cruise ships in Asia. It is a market that Fincantieri wants to conquer with joint ventures in China, and which the Koreans, on the other hand, want to win with European shipyards. So Paris is now waiting for a sign from Rome.