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Hyundai Heavy’s DSME takeover hits snag in Singapore

The ongoing process of Hyundai Heavy Industries’ takeover of Daewoo Shipbuilding & Marine Engineering (DSME) appears to face a setback, as the competition authorities in Singapore raised “concerns” over the two shipbuilding giants’ bids, according to the competition agency, Friday.

The Competition and Consumer Commission of Singapore (CCCS) recently announced the results of its “phase 1 review” of the proposed takeover, and raised “competition concerns” regarding the transaction.

“Third-party feedback suggests that [Hyundai Heavy and DSME] are currently two of the largest suppliers for the global supply of LNG carriers, and possibly large containerships and large oil tankers,” the CCCS said in a statement. “There are concerns that the proposed transaction will remove competition between two main suppliers of these commercial vessels, to the detriment of customers in Singapore.”

The CCCS’ statement also said that “Third-party feedback also revealed concerns on whether alternative suppliers will be sufficiently strong competitors to the merged entity,” adding “There are also concerns that the barriers to entry and expansion, particularly in relation to more sophisticated vessels such as LNG carriers, may be high.”

Though the CCCS raised concerns of weakening competition, it allowed Hyundai Heavy to offer “commitments to address the potential competition concerns” and then it will proceed to a detailed phase 2 review.

A Hyundai Heavy official refused to comment on the ongoing review, but added that it is doing its best to get an approval from each country.

In March, Hyundai Heavy Industries Group signed a 2 trillion won ($1.7 billion) deal with DSME’s largest stakeholder Korea Development Bank to buy DSME. In June, the group set up Korea Shipbuilding & Offshore Engineering to have both Hyundai Heavy and DSME under its wing. If the transaction is finalized, the two companies’ combined backlogs in very large crude carriers (VLCCs) and LNG carriers will each account for more than 60 percent of the total in the world.

Since it is a merger between world’s top shipbuilders with monopolistic market shares in building certain vessels, it requires approval from competition authorities in related countries so that their presence does not undermine bargaining power of smaller rivals in respective markets or damage customers there.

Hyundai Heavy has submitted its application to antitrust agencies in five countries ― Korea, China, Japan, Singapore and Kazakhstan ― and the EU and opposition from any country will disrupt the merger plan. Kazakhstan approved the two companies’ merger on Oct. 29, while the other countries’ authorities are reviewing the proposal.

The European Union is scheduled to announce the results of the phase 1 review on Dec. 17.
Source: Korea Times

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