South Korea’s Hyundai Heavy Industries (HHI) has signed a formal deal for the acquisition of Daewoo Shipbuilding & Marine Engineering (DSME), thereby creating a global naval and commercial shipbuilding giant.

The deal was reported by the news agency Yonhap which said that the merger of the two South Korean shipbuilders would create an entity with a 20 percent share in the market.

In addition to constructing conventional and special-purpose commercial ships, HHI and DSME share domestic naval shipbuilding contracts. Both companies are also exporters of naval shipbuilding know-how with HHI currently building ships for the navies of the Philippines and New Zealand and DSME building submarines for Indonesia, frigates for Thailand, and tankers for the navies of the UK and Norway.

Hyundai Heavy Industries signed the take over deal with the state-run Korea Development Bank (KDB) on Friday.

Samsung Heavy Industries, another South Korean shipbuilder, earlier said it was not interested in buying DSME which was heavily hit by the slump in commercial newbuilding orders following the decline in oil prices.

As outlined by Yonhap, the deal is estimated to be worth over 2 trillion won (US$1.78 billion) and will see KDB hand over its Daewoo Shipbuilding stocks to Hyundai Heavy and buy Hyundai Heavy stocks to be issued later.

“In return, Hyundai Heavy will be split into two entities, with one to be listed on the market. Hyundai Heavy will also sell its stocks to KDB,” the Yonhap report said.