KSOE extends deadline for DSME acquisition

Korea Shipbuilding & Offshore Engineering (KSOE), a shipbuilding holding company of Hyundai Heavy Industries Group, has extended the deadline for the acquisition of shares in compatriot Daewoo Shipbuilding and Marine Engineering (DSME) amid regulatory delays.

The mega-merger deadline has been extended from September 2020 to June 2021 after KSOE signed a contract amendment with DSME on January 22, 2021.

Hyundai Heavy Industries Holdings and Korea Development Bank signed a shares acquisition agreement to sell the bank’s shares in DSME in January 2019.

The proposed tie-up will see HHI take over Geoje-based DSME from Korean state lender KDB, the majority shareholder owning a 55.7 percent stake in the company.

In order to proceed with the planned acquisition, Hyundai Heavy Industries Group reorganized into two entities, Korea Shipbuilding & Offshore Engineering Co. (KSOE), a shipbuilding arm of the group, and reshuffled Hyundai Heavy Industries.

The $1.8 billion merger has secured approvals from regulatory bodies in China,  Singapore, and Kazakhstan, while approvals from South Korea, Japan, and the European Union are still pending.

Specifically, the EU probe into the merger has been delayed due to the impact of the coronavirus pandemic as it was affecting the shipbuilders’ ability to deliver important information to the commission on time.

Hence, the Commission suspended the deadline for submission of its decision on several occasions.

In 2019, the EU regulatory body voiced concerns that the proposed transaction may remove DSME as an important competitive force in the markets of large containerships, oil tankers, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers.

It also said that it was likely that the remaining shipbuilders would not exert sufficient competitive pressure on the merged entity in the four markets concerned by the transaction, adding that the customers would not have sufficient bargaining power to constrain the merged entity.

On the other hand, Hyundai Heavy Industries Holdings (HHIH) is optimistic that the transaction would be closed shortly as the company expects to complete the acquisition of smaller rival DSME by the end of the first half of 2021.