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| A photo of an HHI-won LPG carrier is seen in this file photo, Sunday. Korea Times file |
By Kim Yoo-chul
The European Union's antitrust regulator has confirmed that it will restart its thorough probe over the validity of a mega merger deal of two Korean shipbuilders ― Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries Holdings (HHIH).
Sources told The Korea Times Sunday that both DSME and HHIH have been notified of the EU regulator's planned resumption of the investigation because they are in the final process of resubmitting required documents for review by the European regulator.
"The key concern by the European Commission was that the merger plan, if approved, would reduce competition in various global cargo shipbuilding markets. The central point is that the merger entity will have greater control in the promising liquefied natural gas (LNG) vessel market," an official familiar with the issue said, adding HHIH is reviewing a range of options and scenarios for an early approval.
"Honestly, chances are quite high that the Commission would grant conditional approval for the proposed merger under which the merged entity may be restricted in terms of expanding shipbuilding capacity," another official said.
Given the significance of the cargo shipbuilding industry for the European Union with maritime transport representing a substantial portion of the EU's internal and external freight trade, the EU has been carefully assessing the proposed transaction over whether or not it would have any negative impact on the construction of cargo ships.
The commission holds the key in moving forward with the proposed transaction approval in other countries as the EU has the top 10 shipbuilding companies out of the global top 25.
Any delay in the EU's investigation process means an additional delay in other countries. HHIH requested five countries ― Japan, China, Singapore, Korea and Kazakhstan ― as well as the EU for approval of its proposed transaction. Only Kazakhstan has okayed the plan. HHIH requires approval from all countries.
Earlier, following its preliminary market investigation, the commission stated that it has concerns that the proposed merger may remove DSME as an important competitive force in the following markets ― large containerships, oil tankers, LNG carriers and liquefied petroleum gas (LPG) carriers. As barriers are high for new entrants in these segments, the EU was worrying that the merger could lead to higher prices, less choice and reduced incentives to innovate.
While the transaction was reported to the EU regulator, last year, both DSME and HHIH failed to submit the required documents during the initial probe to possibly address such looming concerns. In January and March, the Commission halted its review of the deal "due to the COVID-19 pandemic."
The South Korean duo is believed to have offered concessions to the commission to move forward with the merger review process as its response to such EU's concerns. Company officials declined to elaborate.
Regarding the specifics of the restart of the EU's probe on the transaction, both HHIH and DSME officials said they will cooperate with the Commission. HHI earlier inked a deal to acquire a 55.72 percent stake in DSME in an ambitious deal that will see the merged entity control a 21 percent of the global shipbuilding market. HHI Group separated HHI into two entities. If the transaction is approved, HHI Group will have four shipbuilders under its flag including DSME.
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