EU vetoes Hyundai Heavy Industries-DSME merger

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EU vetoes Hyundai Heavy Industries-DSME merger

A container ship built by Daewoo Shipbuilding and Marine Engineering docked at a port in Busan in 2020. [YONHAP]

A container ship built by Daewoo Shipbuilding and Marine Engineering docked at a port in Busan in 2020. [YONHAP]

The acquisition of Daewoo Shipbuilding Marine and Engineering (DSME) by Hyundai Heavy Industries fell apart as the European Union vetoed the merger of the two Korean shipbuilders, noting especially potential for domination in LNG vessel manufacturing.
 
 
"Today, the Commission has adopted a decision prohibiting a merger that would combine two leading global shipbuilding companies," said European Commission Executive Vice President Margrethe Vestager on Thursday.
 
 
"The merger would have created a dominant position in the market for the construction of large LNG carriers," Vestager said, stressing Korean companies are among the "handful" building the sophisticated vessels. "This would have led to less choice, higher prices and ultimately less innovation for European customers."
 
 
The combined market share of the two companies in LNG vessels is estimated to be around 70 percent.
 
 
The final decision came nearly three years after Hyundai Heavy Industries announced that it was buying DSME.
 
 
Other countries, including China, Singapore and Kazakhstan, have approved the merger.
 
 
The Korean government noted that DSME will continue to operate as normal, especially as the shipbuilder's creditors have extended financial aid, including guarantees, until end of the year.
 
 
It added that Korea Development Bank (KDB), which is DSME's largest shareholder, will come up with plans to find a new buyer.
 
 
The Korean government noted that the impact of EU's decision will likely be limited considering that the Korean shipbuilding industry has improved, with global orders recovering to levels before the industry's struggle began in 2016.
 
 
Global orders in 2016 fell sharply from 42 million CGT in 2015 to 14 million CGT. Last year, orders placed totaled 47 million.
 
Korea's market share, which fell to 16 percent in 2016, rebounded in 2021 to 37 percent.
 
 
The government cited Korea's strength in high-value and environmentally-friendly vessels.
 

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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