Despite Hyundai Heavy Industries’ (HHI) submission of a number of solutions to address concerns over fair competition among large container vessel builders, the European Union has reached a consensus to block its proposed acquisition of Daewoo Shipbuilding & Marine Engineering (DSME), two sources involved with the matter said Tuesday.
“Several rounds of tough discussions between HHI and EU antitrust regulators have taken place specifically regarding the possible impact of the deal on the big container ship and LNG (liquefied natural gas) carrier segments. But the EU remains concerned that the HHI-DSME deal won’t ensure fair market competition in these profitable shipbuilding sectors over the long term. Therefore, its members reached a consensus to block the proposed acquisition,” one source based in Europe told The Korea Times.
When asked about the details of the remedies HHI presented to the EU, the source said, “HHI was said to have pledged to not inflate the price of large container and LNG ships for a certain period and to work closely with major European shippers in terms of stabilizing both the EU’s internal and external freight trade.”
HHI is estimated to pay around $2 billion to acquire DSME. But because the transaction will help HHI become the world’s top shipbuilder with a 21 percent market share, getting approval from top international antitrust regulators is mandated. HHI received approval of the deal from some countries but the EU holds the key because Europe’s shipping companies are the top customers of both DSME and HHI and represent 30 percent of global demand for cargo vessels.
Well aware that cargo shipbuilding is a crucial industry for the entire EU, HHI tried to persuade its antitrust regulators that the merged entity wouldn’t have outsized bargaining power, which could hurt the interests of European customers. The Korean firm also vowed to help European shipbuilders and shippers by sharing some patented technology and know-how to lower the barriers for entry into the large container ship market.
“As far as I know, HHI’s holding company considered separating some of its affiliates to show its willingness to maintain its business size and not to seek bulky external growth. But these proposals also failed to impress the EU’s antitrust regulators,” a government source said.
Details of the deal were submitted to the EU in November 2019. Because it also awaits approval from South Korea, another focus is how the Korean government will view the deal with the head of the country’s antitrust regulator recently telling reporters that the agency will try to complete its review by the end of the year.
HHI said the company wasn’t in a position to discuss the specifics of the ongoing takeover review process, but stressed it’s been doing its best to get approval from the EU. Shares of HHI fell by 2.19 percent to end at 111,500 won on the KOSPI, the country’s main bourse, Tuesday.
Source: koreatimes.co.kr