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| An LNG carrier is seen in this file photo. Korea Times file |
By Kim Yoo-chul
China's anti-trust agency has approved the merging of Korea's top two shipbuilders, initiated by Hyundai Heavy Industries Holdings (HHIH), saying the acquisition would not hurt fair competition with the new entity's rivals, HHIH said Monday.
"The State Administration for Market Regulation (SAMR) notified us that the takeover plan will not hurt fair market competition. SAMR has issued unconditional approval for the combining of HHIH and Daewoo Shipbuilding and Marine Engineering (DSME)," HHIH said.
After a thorough review under China's anti-trust law, the SAMR reached a consensus that HHIH taking over DSME won't limit the best interests of market players, company officials added.
The latest notification is the third after anti-trust agencies in Kazakhstan and Singapore gave the go ahead for the takeover, in October and August, last year.
HHIH announced the DSME takeover a year ago, however, the acquisition was subject to approval from countries whose shipbuilding sectors could be affected. Shipbuilding is one of Korea's mainstays in the transportation industry that is a central segment of the country's export-reliant economy.
The company asked for approval from the regulatory bodies in six countries ― including Korea ― and one central unified body; they were Kazakhstan, Japan, Singapore and China, and the EU.
Officials were expecting the latest approval from China will help it get early permission from the other regulatory agencies. "We will try hard to get the green light from the remaining two other countries and the EU by persuading them of the beneficial implications of the takeover according to due process," an HHIH official said.
A key issue is whether Chinese approval will have any impact on the EU's decision as HHIH has been facing a full-scale investigation because of anti-trust concerns. The estimated monetary value of the takeover is in the region of $1.8 billion.
The EU is looking into whether the takeover will help the combined shipbuilder get over 50 percent of global orders for liquefied natural gas (LNG) carriers and 20 percent of orders for container vessels, tankers and dry bulk ships, as this could hurt the best interests of European shipbuilders.
But after the years-long slump in the industry, global shipbuilding and shipping are showing some signs of marginal improvements both in terms of orders and freight rates thanks to the growing volume of international trade.
Korea's Fair Trade Commission (KFTC) is likely to grant permission for the takeover, however, industry officials said the timing of the approval may be in sync with moves by the EU. HHIH and DSME earlier said they would run each firm independently after the takeover, which means that each company will handle their own contracts with owners and shippers.
Unlike conventional ships, LNG carriers, for example, have better margins for shipbuilders and demand for this type of vessel is high given governments' moves to shift energy markets toward environmentally-friendly natural gas. DSME is financially backed by the state-funded Korea Development Bank, which owns 55.7 percent of the company.
