Hyundai Heavy-DSME merger probe is back on track in EU, says an article published in Offshore Energy.
EU’s anti-trust body investigation
The European Union’s anti-trust body has resumed its investigation into the proposed acquisition of Koran shipbuilder Daewoo Shipbuilding & Marine Engineering CO., Ltd (DSME) by its compatriot Hyundai Heavy Industries Holdings (HHIH).
Paused investigation
The European Commission stopped the clock on the merger investigation on April 1, 2020. It was establishing that the Coronavirus pandemic was impacting the shipbuilders’ ability to deliver important information to the commission on time.
Supply of missing information
EU Commission spokesperson back in April said,
“Failure to provide the information will lead the commission to stop the clock. Once the missing information is supplied by the parties, the clock is re-started and the deadline for the commission’s decision is adjusted accordingly.”
Suspension lifted
The suspension of the probe was lifted on June 2, 2020 based on the latest data from the anti-trust regulator.
A provisional decision on the case is expected by September 3, 2020.
Reason for the investigation
The investigation into the proposed USD 1.8 billion deal was launched amid anti-trust concerns that the acquisition may :
- reduce competition in the shipbuilding markets and
- result in higher prices.
Major competitive force
DSME is viewed as an important competitive force in several global cargo shipbuilding markets, including large containerships, oil tankers, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers.
As the construction of these technologically advanced ships requires considerable experience and expertise, the entrance of new parties into this market is believed to be limited.
Competition between suppliers
As the tie-up is likely to remove competition between suppliers of these specific ship types, it will probably require the Korean duo to offer concessions to regulatory authorities in order for the merger to move forward.
Impact of the pandemic
The consolidation move is being pursued at a time when the shipbuilding market is facing considerable headwinds from the impact of the pandemic which has quashed interest in newbuilds.
Investment cuts
Over the recent period, ordering has been slow across the board as owners cut investments and preserve cash to secure liquidity during these uncertain times.
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Source: Offshore Energy
