EU Continues to Delay Antitrust Approval of Korean Shipbuilder Merger
The South Korean news agency Yonhap is reporting that the EU’s antitrust review of the proposed merger of Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering continues to be on hold after more than a year of delays and 18 months since the EU said the proposed transaction required an in-depth investigation. The news of the continued delays comes as the companies face their latest deadline by the end of June to complete the merger.
The merger between Korea’s two large shipbuilding was first announced in March 2019 with terms of the transaction set at the end of the year. At the time of the announcement, the companies said that six regulatory bodies would need to review the proposed transaction which would create the world’s largest shipbuilder representing as much as a fifth of the market.
Kazakhstan was the first to approve the merger, followed by Singapore and later China. In addition to the EU, both Japan and South Korea need to approve the merger, but sources have believed that those countries were waiting for the approval from the Europeans.
The European Commission announced in late 2019 that it had opened an in-depth investigation based on its concerns that the merger may reduce competition in various global cargo shipbuilding markets. Based on delays gathering information, in part due to limitations as a result of the coronavirus, the EU has on several occasions suspended the review process. Originally expected to be completed by September 2020, Yonhap is reporting that the review has not progressed since the EU initiated the last pause in July 2020.
To aid in the regulatory review, the Hyundai Group undertook several steps to restructure the operations and management of the companies. Korea Shipbuilding & Offshore Engineering Co. was set up as the holding company that would oversee strategy and acquisitions while Hyundai Heavy Industries would focus on the construction of ships at its three shipyards, Hyundai Heavy Industries, Hyundai Mipo Dockyard, and Hyundai Samho Heavy Industries. DSME would remind a separate operating company.
Unions representing the workers at DSME announced their opposition to the proposed merger. The shipbuilders have said the merger is critical to address the emerging competition from China, which is working to consolidate its position as the world’s leading shipbuilders.
In January 2021, KSOE announced the latest revisions to the timeline with the state-run Korea Development Bank. KDB is the main creditor of DSME and owns the shares that would be sold to Hyundai to effect the merger. The companies agreed to extend the deadline with KDB to June 30, 2021. The deadline for the acquisition of DSME’s shares was also been extended till the end of 2021.
The other larger proposed merger in the shipbuilding industry, between France’s Chantiers de l’Atlantique and Italy’s Fincantieri was called off at the beginning of 2021. France and Italy cited economic changes due to the pandemic and the delays due to the anti-trust review and approval from the European Commission.