Big shipbuilding deal awaits approvals

The Hyundai Heavy Industries (HHI) takeover of Daewoo Shipbuilding & Marine Engineering (DSME) continues to face antitrust hurdles abroad. The merger got the nod from Kazakhstan regulators but still awaits the antitrust investigation results from the European Union, Japan and Singapore, all of which are expressing concerns about the creation of a monopoly at a time when orders for new vessels are low.

The deal has been under review by overseas antitrust authorities since the company proposed the acquisition in January last year. For the deal to go through, HHI needs global approval because of its influence - HHI accounts for 13.9 percent of the shipbuilding market as of 2018, while DSME controlled about 7.3 percent.

It needs to get the green light from five countries - Korea, China, Japan, Singapore, Kazakhstan - and the EU. If any of them reject the deal, it may have to be canceled.

The EU last month announced it couldn’t reach a conclusion in the first round of the screening and said it will proceed with a second round. This isn’t a good sign because the EU approved 93 percent of corporate combinations in the first screening over the past three decades. The EU is particularly careful when reviewing possible monopolies in large industries, like shipbuilding, railway and shipping.

“There are monopoly alarm bells all over this deal,” said a senior commission official from European Commission, the EU’s executive arm, last month, according to a report from The Wall Street Journal. “The probe is set to launch this month and could take up to six months.”

Singapore, which also completed the first round of the screening last month, decided to continue the review in the second round because the combination of the two companies “will remove competition.” Singapore usually approves mergers within a month.

Japan’s Ministry of Economy, Trade and Industry in July filed a complaint with the World Trade Organization, arguing that the state-run Industrial Bank of Korea’s aid to DSME is a subsidy, and therefore, goes against WTO agreements.

China, which announced the merger of its two biggest shipbuilders - China State Shipbuilding and China Shipbuilding Industry - in November is likely to be more open to the HHI-DSME deal.

HHI initially expected the deal to be complete by last year.

“There isn’t anything negative in particular,” said HHI President and CEO Ka Sam-hyun.

BY KIM KI-HWAN AND JIN MIN-JI [jin.minji@joongang.co.kr]