- China has granted unconditional approval Hyundai Group’s acquisition of Daewoo Shipbuilding.
- The merger deal is pending approval from the European Union, South Korea and Japan.
China’s anti-trust agency has approved the merging of Korea’s top two shipbuilders, initiated by Hyundai Heavy Industries Holdings (HHIH), saying the acquisition would not hurt fair competition with the new entity’s rivals, reports the Korean Times.
Combination to not restrict competition
After reviewing the planned merger, China’s antitrust regulator, the State Administration for Market Regulation, concluded that the two South Korean shipbuilder’s combination would not restrict competition, Hyundai Heavy said on Dec. 28.
China became the third country to give the nod to the tie-up, after Singapore and Kazakhstan.
Last year, Hyundai Heavy signed an agreement to acquire a 55.7% stake in Daewoo Shipbuilding from the state-run Korea Development Bank for 2 trillion won ($1.8 billion), alongside a pledge to inject 1.5 trillion won into Daewoo to buy the latter’s new shares.
But Hyundai was unable to proceed with the acquisition because it has yet to get the green light from three other countries – European Union, South Korea and Japan – of the six countries from which it sought approval of the merger.
Fair market competition
“The State Administration for Market Regulation (SAMR) notified us that the takeover plan will not hurt fair market competition. SAMR has issued unconditional approval for the combining of HHIH and Daewoo Shipbuilding and Marine Engineering (DSME),” HHIH said.
“We had worried about a possible interference with the deal by China, our archrival in the shipbuilding industry, but we received unconditional approval after proactively addressing competition concerns,” said a source from Korea Shipbuilding & Offshore Engineering Co., a unit of Hyundai Heavy Industry Group. “We expect China’s approval will have a positive influence on decisions to be made by other countries.”
EU review expected!
Korea Shipbuilding is a holding company within the Hyundai Heavy Industries Group, recently established to run the group’s four shipbuilding units, including Hyundai Heavy Industries and Daewoo Shipbuilding.
Still, the shipbuilding industry is anxiously awaiting the upcoming results of the EU review. Most of the two Korean shipbuilders’ clients are based in Europe, including Greece, in addition to the continent’s complex and detailed rules relevant to company mergers. Further, EU approval is highly likely to clear the way for other countries to follow suit.
EU has postponed the scrutiny of the two Korean shipbuilders’ combination three times, citing difficulties in conducting an onsite study of their facilities due to the COVID 19 pandemic. EU has not yet given a clear timeline for the review.
Positive review needed
In June, the EU executive committee delivered the interim results of its review on the tie-up between Hyundai Heavy and Daewoo Shipbuilding. In the report, it stated that concerns over restricted competition as a result of their merger were resolved for the markets of tankers, container ships and offshore plants, but not in the segment of liquefied natural gas (LNG) carriers.
LNG carrier, valued at around 200 billion won per unit, is highly profitable for shipyards but requires sophisticated shipbuilding skills.
“Even a single objection from the foreign countries concerned will have a negative impact on the acquisition. For Hyundai Heavy, it is the most important to have the EU review completed in the nearest future,” said a shipbuilding industry source.
South Korea is home to the world’s three big shipbuilders – Hyundai Heavy, Daewoo Shipbuilding and Samsung Heavy Industries Co. Over the past two months, the three shipbuilders occupied 70% of the shipbuilding orders placed worldwide, securing a combined $11.3 billion worth of orders for 85 vessels.
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Source: The Korea Times
