Hyundai Heavy-DSME merger probe in EU back on track

The European Union’s anti-trust body has resumed its in-depth investigation into the proposed acquisition of Koran shipbuilder Daewoo Shipbuilding & Marine Engineering CO., Ltd (DSME) by its compatriot Hyundai Heavy Industries Holdings (HHIH).

The European Commission stopped the clock on the merger investigation on April 1, 2020, after establishing that the Coronavirus pandemic was impacting the shipbuilders’ ability to deliver important information to the commission on time.

“Failure to provide the information will lead the commission to stop the clock. Once the missing information is supplied by the parties, the clock is re-started and the deadline for the commission’s decision is adjusted accordingly,” a spokesperson of the EU Commission told our publication back in April.

Based on the latest data from the anti-trust regulator, the suspension of the probe was lifted on June 2, 2020, and a provisional decision on the case is expected in three months, i.e., by September 3, 2020.

The investigation into the proposed USD 1.8 billion deal was launched amid anti-trust concerns that the acquisition may reduce competition in the shipbuilding markets and result in higher prices.

DSME is viewed as an important competitive force in several global cargo shipbuilding markets, including large containerships, oil tankers, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers.

The construction of these technologically advanced ships requires considerable experience and expertise, hence, the entrance of new parties into this market is believed to be limited.

As the tie-up is likely to remove competition between suppliers of these specific ship types, it will most probably require the Korean duo to offer certain concessions to regulatory authorities in order for the merger to move forward.

The consolidation move is being pursued at a time when the shipbuilding market is facing considerable headwinds from the impact of the pandemic which has quashed interest in newbuilds.

Over the recent period, ordering has been slow across the board as owners cut investments and preserve cash to secure liquidity during these uncertain times.