South Korea’s shipbuilders deal still in limbo

SEOUL: The European Union’s (EU) antitrust regulator has not yet resumed its review of the proposed merger between South Korea’s two leading shipbuilders, putting its decision on hold for nearly a year.

The EU Competition Commission has stopped the clock in its in-depth investigation into the Us$1.8bil (Rm7.4bil) acquisition of Daewoo Shipbuilding & Marine Engineering Co (DSME) by Hyundai Heavy Industries Holdings Co (HHIH) since July 3, 2020.

“The clock is still stopped,” Maria Tsoni, a spokesperson at the commission, said in the latest email to Yonhap News Agency.

To comply with merger deadlines, parties must supply the necessary information for the investigation in a timely fashion, the spokesperson said, adding that “failure to do so will lead the commission to stop the clock”.

In relation to the commission’s remarks, an official from Korea Shipbuilding & Offshore Engineering Co (KSOE), who declined to be named, said that the company has been in talks with the EU antitrust watchdog over the issue.

KSEO is the subholding company of HHIH. As of June, of six countries – China, Singapore, Kazakhstan, Japan, the EU and South Korea – where Hyundai Heavy applied for approval, three countries, namely, China, Kazakhstan and Singapore, gave the green light to the deal, which could reshape the global shipbuilding sector.

The approval by the EU has been considered as crucial for the merger, as a huge chunk of customers for Hyundai Heavy and Daewoo Shipbuilding are European shipping firms.

In March 2019, Hyundai Heavy signed the deal with the state-run Korea Development Bank (KDB), the main creditor of DSME, to buy a 55.72% stake in the shipbuilder that had been mired in a severe cash shortage since 1999.

The deal could create the world’s biggest shipbuilder with a 21% market share. Under the deal, Hyundai Heavy Industry Group split Hyundai Heavy Industries into two entities – KSOE, a holding company that governs shipbuilding units under the group and handles the acquisition – and a reorganised Hyundai Heavy Industries that focused on the construction of ships.

Global shipbuilding behemoth HHIH’S chairman Kwon Oh-gap said in his New Year’s message for the year that the EU’S regulatory review of the merger deal has been a little delayed but is expected to be completed within the first half of this year.

KSOE currently manages the group’s three shipbuilding units – Hyundai Heavy Industries, Hyundai Mipo Dockyard Co and Hyundai Samho Heavy Industries Co.

With the deal delayed, unionised workers of DSME have been against the deal, citing it may form a monopoly in the shipbuilding industry and cut jobs, as well as cause the collapse of the supply chain in the local shipping industry.