Shareholders of Hyundai Heavy Industries on Friday approved a split-up plan of the company amid intense opposition from the labor union.

The split is the first step for the country’s largest shipbuilder to carry out its proposed merger with runner-up Daewoo Shipbuilding & Marine Engineering.

In March this year, HHI signed a deal with Korea Development Bank to acquire DSME for 2 trillion won ($1.7 billion). The state-run bank is the largest shareholder of cash-strapped DSME, with a 55.7 percent stake.

The proposal triggered a stiff backlash from the labor unions of both companies. While HHI unionists denounced the split-up, which they saw as a means to manipulate the account books in favor of the owner family, DSME workers protested against the market monopoly of HHI -- which will have a global market share of 20 percent after the merger.

The shareholders meeting, which was delayed due to the unionists’ sit-in protest, was attended by 72.2 percent stakeholders, of which 99.9 percent voted in favor of the split-up.

The National Pension Service, which is second-largest shareholder of HHI with a 9.35 percent stake, also gave its nod.

Following the decision, the group will be divided into two companies: an intermediate holding firm called Korea Shipbuilding & Marine and a business firm named Hyundai Heavy Industries.

KS&M will have four affiliates -- including the present HHI, DSME, Hyundai Samho Heavy Industries and Hyundai Mipo Dockyard.

It will be in charge of investments and research & development for future technologies while the other unit will be accountable for shipbuilding, offshore plants and engine machine businesses, according to the company. 

Earlier in the day, HHI’s management had to change the time and venue for the shareholders meeting as around 2,000 workers occupied the scheduled place with around 1,000 motorcycles to block them from entering the building. The police also deployed around 2,000 troops in case of an emergency.

Their claim was that following the split-up, HHI will see a drastic rise in debts and job cuts, while cash reserves and other assets will belong to the intermediate holding firm, according to Kim Hyung-kyun, a labor union representative.

Some industry watchers, like Park Sang-in, a professor of Seoul National University, confirmed such doubts citing the firm’s past policies “favorable to its owner family.”

Critics also referred to 2017 when Hyundai Global Service transformed into an affiliate from being an after-sales service business division under HHI. The lucrative division which was directly under the holding company of HHI reportedly brought immense profit to Chairman Chung Mong-joon, who has a controlling stake in the shipbuilding company, and his eldest son Chung Ki-sun.

In December last year, senior Chung was given 74.8 billion won ($62.6 million) in dividends and his son received 14.7 billion won despite business difficulties.

By Shin Ji-hye (shinjh@heraldcorp.com)