POSCO, South Korea's largest steel maker, said it is in talks with overseas banks to help fund a bid for Daewoo Shipbuilding & Marine Engineering that could be worth US$4.9 billion.

Posco has been in contact with potential investors, including a European bank, to raise funds for a 50.4-percent stake in the world's third-largest shipbuilder, said Ko Min Jin, a Seoul-based Posco spokeswoman, in response to a MoneyToday report.

"Details, such as the size of investment, haven't been decided yet," Ko said.

A stake in Daewoo Shipbuilding would allow the company to enter the offshore oil-exploration business as depleting reserves increase the need for deep-sea drilling and production. Posco, already in talks with the National Pension Service, is seeking investors to help with funding as credit tightens in the financial crisis.

The unidentified European bank is expected to invest 1 trillion won (US$723 million), Bloomberg News reported.

State-owned Korea Development Bank and Korea Asset Management Corp are selling their Daewoo Shipbuilding shares, worth 1.85 trillion won based on yesterday's closing price. A preferred bidder will be selected by the end of the month. The stake could fetch as much as 7 trillion won, according to analysts' forecasts.

Daewoo Shipbuilding dropped 6.6 percent to close at 19,150 won. Posco gained 1.7 percent, to 370,000 won.