Commission hit for requiring "excessive" demands for merger
On Thursday, the European Commission rejected Hyundai Heavy Industries' envisioned acquisition of Daewoo Shipbuilding & Marine Engineering (DSME). The commission said in a statement that the envisaged combination of the world's two largest shipbuilders would give birth to "dominant position and reduce competition in the construction of large liquefied gas (LNG) carriers." The statement said Hyundai Heavy did not formally offer remedies to address the commission's concerns that the merger would have led to fewer supplies and higher prices for LNG ships.
It is very regretful that the EU has vetoed the takeover plan as it will virtually nullify the nation's years-long efforts toward enhancing competitiveness of the shipbuilding sector through restructuring. The EU's review had been considered as the knottiest barrier in the process of Hyundai Heavy's possible acquisition of its small partner DSME which began early 2019.
Of the six countries subject to the assessment of the acquisition, the mega deal already got approval from the governments of China, Kazakhstan and Singapore. It was supposed to get easy endorsement from South Korea and Japan. The EU is home to major shippers such as Maersk and CMA-CGM, which have been complaining they might have to pay higher prices for purchase of ships once a gigantic shipbuilding firm is created.
This indicates the commission has come up with the recent decision to protect the interests of its firms, though it took issue with the possible dominance of the market by the combined firm. The EU is also taking flak for having presented seemingly "unacceptable" demands such as technology transfer, sell-off of LNG units and lowering ship prices. The EU made these requests claiming that the deal would enable the new firm to account for more than 60 percent of the world's LNG vessels. It has called on Hyundai Heavy to offer remedies to reduce the potential dominance.
Hyundai Heavy called the commission's decision "unreasonable and regretful" and said it would paralyze the efforts to realign the shipbuilding sector and avoid a possible "bloody" price competition. Hyundai Heavy said in a statement that it would take all possible measures against the decision including legal action.
The Korean government played down the effect of the EU's vetoing the deal, vowing to find another company to take over DSME. The business climate facing the shipbuilding industry has been improved compared to 2019 and the impact of the EU's decision will be limited, according to a statement jointly issued by the Ministry Economy and Finance, Ministry of Trade, Industry and Energy and the Financial Supervisory Commission.
We urge the relevant parties to make concerted efforts until the end by taking all possible steps such as filing a lawsuit with the European Union's court. The government should also help Hyundai Heavy in its bid toward this end while seeking a "plan B" to speed up the much-needed privatization of the debt-ridden DSME and strengthen the competitiveness of the nation's shipbuilding industry.
On Thursday, the European Commission rejected Hyundai Heavy Industries' envisioned acquisition of Daewoo Shipbuilding & Marine Engineering (DSME). The commission said in a statement that the envisaged combination of the world's two largest shipbuilders would give birth to "dominant position and reduce competition in the construction of large liquefied gas (LNG) carriers." The statement said Hyundai Heavy did not formally offer remedies to address the commission's concerns that the merger would have led to fewer supplies and higher prices for LNG ships.
It is very regretful that the EU has vetoed the takeover plan as it will virtually nullify the nation's years-long efforts toward enhancing competitiveness of the shipbuilding sector through restructuring. The EU's review had been considered as the knottiest barrier in the process of Hyundai Heavy's possible acquisition of its small partner DSME which began early 2019.
Of the six countries subject to the assessment of the acquisition, the mega deal already got approval from the governments of China, Kazakhstan and Singapore. It was supposed to get easy endorsement from South Korea and Japan. The EU is home to major shippers such as Maersk and CMA-CGM, which have been complaining they might have to pay higher prices for purchase of ships once a gigantic shipbuilding firm is created.
This indicates the commission has come up with the recent decision to protect the interests of its firms, though it took issue with the possible dominance of the market by the combined firm. The EU is also taking flak for having presented seemingly "unacceptable" demands such as technology transfer, sell-off of LNG units and lowering ship prices. The EU made these requests claiming that the deal would enable the new firm to account for more than 60 percent of the world's LNG vessels. It has called on Hyundai Heavy to offer remedies to reduce the potential dominance.
Hyundai Heavy called the commission's decision "unreasonable and regretful" and said it would paralyze the efforts to realign the shipbuilding sector and avoid a possible "bloody" price competition. Hyundai Heavy said in a statement that it would take all possible measures against the decision including legal action.
The Korean government played down the effect of the EU's vetoing the deal, vowing to find another company to take over DSME. The business climate facing the shipbuilding industry has been improved compared to 2019 and the impact of the EU's decision will be limited, according to a statement jointly issued by the Ministry Economy and Finance, Ministry of Trade, Industry and Energy and the Financial Supervisory Commission.
We urge the relevant parties to make concerted efforts until the end by taking all possible steps such as filing a lawsuit with the European Union's court. The government should also help Hyundai Heavy in its bid toward this end while seeking a "plan B" to speed up the much-needed privatization of the debt-ridden DSME and strengthen the competitiveness of the nation's shipbuilding industry.
