The world's biggest shipbuilder, South Korea's Hyundai Heavy Industries, has reached a deal to acquire a majority stake in ailing number two Daewoo from the government, Seoul said Thursday.
The world's top three shipbuilders are South Korean -- Samsung Heavy ranks third -- but the industry has been hammered in recent years by overcapacity and plunging ship prices.
Daewoo Shipbuilding & Marine Engineering has struggled in particular and has repeatedly been bailed out by the government to avoid collapse, at a total cost of several billion dollars.
Hyundai Heavy itself announced net losses of 633 billion won ($569 million) for 2018 on Thursday, blaming higher steel costs and lower demand.
But the state-funded Korea Development Bank (KDB), which owns 55.7 percent of Daewoo, said Hyundai had agreed to take over its stake.
Rather than paying cash, the shipbuilder will split itself in two and issue KDB shares in a new holding company that will own Daewoo and most of Hyundai Heavy's existing businesses.
The deal would further consolidate Hyundai Heavy's position as the world's largest shipbuilder, giving it more than 20 percent of the global market.
It will go through unless Samsung Heavy makes a better offer, KDB officials said, with a final decision expected in March.
South Korea's "Big Three" shipbuilders were once hailed as a major driver of the country's export-reliant economy -- the world's 11th largest.
Year after year, they churned out enormous cargo ships, oil tankers and offshore drilling rigs for shipping firms and energy giants around the world.
But a prolonged slump in oil prices and the global economic slowdown sapped demand for tankers and container ships, while overcapacity, regional rivalry and competition from cheaper Chinese shipbuilders squeezed profit margins.
Hyundai Heavy's 2018 losses represented a significantly worse performance than the previous year, when it was 93.4 billion won in the red.
The shipbuilder said its acquisition of Daewoo was aimed at "boosting the competitive edge of South Korea's shipbuilding industry by maximising the synergy effect".