EU may block Hyundai’s mega acquisition deal with Daewoo Shipbuilding
The European Union (EU) has been holding back on giving its approval for Hyundai Heavy Industries’ (HHI) merger with Daewoo Shipbuilding & Marine Engineering (DSME). The merger process has taken close to three years.
The EU has made a broad consensus not to approve the merger, citing monopoly concerns in the liquefied natural gas (LNG) shipbuilding industry, sources and officials familiar with the issue said. HHI and DSME are the top two leading companies in the LNG shipbuilding sector.
“The EU has reached a broad consensus not to approve the merger. As expected, the possible monopolization of the LNG sector has become a big cause for concern, with the official decision to be made around the year end,” a senior industry official said.
Industry sources say that although the EU disapproves of the merger, it does not prevent the two companies from going through with it, though it could hinder future business with EU member states.
In 2019, HHI requested approval for its planned acquisition of DSME from China, Kazakhstan, Singapore, the EU, Japan and South Korea. So far, only China, Singapore and Kazakhstan have given the green light.
Because the EU holds the key to the entire process, in terms of the region’s market influence and size, HHI is said to have offered the EU a remedy plan so as to ensure them that the merged entity won’t hurt fair market competition.
While HHI vowed to freeze the cost of LNG ships over a certain period and clarified its intention to transfer some of its LNG vessel-related technology in exchange for receiving EU approval, its offer reportedly failed to impress the EU.
“So will Korea Shipbuilding & Offshore Engineering (KSOE) sell off other affiliates to seal the deal? In the current state, it will be difficult to do so, but the EU is a huge market for them to ignore, so they will have to consider selling part of their assets,” another industry source said.
The continued delay in the EU’s decision has worsened the situation for KDB and HHI, as DSME’s profitability continues to slump. DSME’s sales for the first half of the year dropped 44.7 percent year-on-year.
“We cannot reveal the specifics of the screening process, but we are doing all we can to secure approval for the merger,” an HHI official said.
Source: The Korea Times