South Korea GS drops joint bid for Daewoo shipyard

SEOUL (Reuters) - South Korean energy and construction group GS (078930.KS) said on Monday it has pulled out of a consortium with POSCO (005490.KS) to buy Daewoo Shipbuilding (042660.KS), casting a cloud over POSCO's push for the deal.

The abrupt announcement came hours after three major South Korean corporate groups, including steelmaker POSCO and GS, submitted final bids for the controlling stake in Daewoo Shipbuilding & Marine Engineering by the Monday deadline.

It was not immediately known why GS had quit the joint bid for 50.4 percent of the world's No. 3 shipbuilder, with the stake estimated to fetch up to $4 billion to $5 billion.

GS Group and POSCO, the world's fourth-largest steel maker, announced their surprised tie-up in the race on Thursday.

POSCO spokeswoman Ko Min-jin declined to comment on GS's pullout on Monday, but said the company will convene an emergency board meeting to discuss the matter.

Kim Tae-gyun, a spokesman for the Korea Development Bank, which is a top shareholder in Daewoo and is also handling the sale, said it was discussing how to react to GS's move.

The initial enthusiasm for the deal has weakened as Daewoo's share price has slid 62 percent so far this year, hit by global financial market turmoil and a slowing industry outlook.

The 50.4 percent Daewoo stake on sale was initially expected to fetch as much as $8 billion.

Daewoo Shipbuilding shares jumped 9.2 percent in a market-wide rebound on Monday, to end at 19,500 won before GS's announcement. That values the 50.4 percent stake being sold at 1.88 trillion won ($1.49 billion).

The successful bidder for Daewoo shipyard could secure a new growth engine from the lucrative energy-related ship business and strong cash flows.

Hyundai Heavy Industries (009540.KS), the world's biggest shipbuilder, and chemical and energy-focused Hanwha Group also submitted bids separately.

Foreign buyers are not allowed to make bids on their own, but can join local consortiums in a limited capacity, due to Daewoo's involvement in the defense industry.

Details of the bids, including prices, were not revealed. State-run Korea Development Bank is expected to pick a preferred bidder later this month.

($1=1264.9 Won)

(Reporting by Rhee So-eui and Kim Yeon-hee; Additional reporting by Miyoung Kim, Angela Moon and Cheon Jong-woo; Editing by Keiron Henderson and Erica Billingham)