Merger between Korea’s top shipbuilders delayed by coronavirus

HHI_Credit_Bloomberg

The planned merger between Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) within 2020 has become uncertain due to delayed reviews at home and abroad due to the COVID-19 pandemic.

The European Commission has suspended its review of the business combination between Hyundai Heavy Industries and DSME three times this year, saying it is difficult to collect data due to the pandemic.

The commission postponed its review twice in March in the aftermath of the pandemic, but resumed it two months later, setting Sept. 3 as the deadline. However, it suspended the screening process in July for the third time and as a result passed the deadline, making it difficult to predict when the review results will come out.

Hyundai Heavy Industries and DSME are required to undergo a corporate combination review in six countries — Korea, Europe, Japan, China, Kazakhstan and Singapore. Only Kazakhstan and Singapore have thus far approved the merger between the two companies.

Of the remaining four, the biggest hurdle is the EU. Its competition laws are more complicated than other countries. In Europe, Greece, Norway, Denmark and Switzerland have global shipping companies. The EU is reportedly examining the possibility of the HHI-DSME merger restricting competition in the gas carrier business.

If the two companies merge, the unified company will account for 60 percent of the LNG carrier market, which is much higher than their combined market share of 21 percent for all types of ships.

If the EU approves the merger, other countries are likely to follow suit because there are few reasons not to allow it. The Korean Fair Trade Commission plans to complete its review by the end of 2020. It will be difficult for China and Japan to oppose the merger due to mergers of their own companies.

China’s two top shipbuilders, SSSC and CSIC merged in November 2019, while Japan’s No. 1 shipbuilder Imabari Shipbuilding and No. 2 JMU will marry.

Against this backdrop, the two Korean shipbuilders see Singapore’s “unconditional approval” in late August as good news because Singapore’s judgment can affect the EU’s decision.

Source: Business Korea

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