EU Rejects Daewoo Shipbuilding-Hyundai Heavy Industries M&A... Korea Expresses Regret (Comprehensive)

The Merger and Acquisition (M&A) Ultimately Falls Through

[Asia Economy Reporter Park Sun-mi] The South Korean government and related agencies expressed regret over the European Union's (EU) decision to disapprove the corporate merger between Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries.

On the 13th (local time), the European Commission announced that it would not approve the merger between Daewoo Shipbuilding & Marine Engineering and Korea Shipbuilding & Offshore Engineering, the shipbuilding holding company of Hyundai Heavy Industries Group. The merger and acquisition (M&A) between the two shipbuilding companies, which had been ongoing for three years since the main contract was signed in 2019, has ultimately failed.

The EU cited the reason for disapproval as the merger creating a dominant position in the liquefied natural gas (LNG) carrier market, which would hinder competition.

The South Korean government and related agencies expressed regret over the EU's decision. In 2019, considering the difficult conditions in the shipbuilding industry at the time, the Korea Development Bank and Hyundai Heavy Industries agreed to pursue a corporate merger between the two shipbuilding companies to normalize DSME's management and strengthen the competitiveness of the domestic shipbuilding industry, and proceeded with the necessary procedures such as merger reviews by competition authorities. The government also expected that the merger would contribute to achieving economies of scale in the domestic shipbuilding industry and resolving excessive competition.

The government and related agencies, including the Korea Development Bank, stated, "Since competition authorities in China, Singapore, and Kazakhstan, which completed their reviews, approved this merger, we regret the EU's disapproval decision, which is contrary to those approvals." However, they added that given the recent improvement in the shipbuilding industry's conditions compared to 2019, the EU's disapproval is not expected to have a significant impact on the domestic shipbuilding sector.

Although the EU's disapproval has made the previously pursued merger between Daewoo Shipbuilding and Hyundai Heavy Industries difficult, the government and related agencies plan to steadfastly promote the enhancement of the domestic shipbuilding industry's competitiveness and the normalization of DSME by making the most of the improved industry conditions.

The government announced that it will continue efforts to secure competitiveness in the shipbuilding industry through transformation into a high value-added industry focused on core technologies and equipment, smooth supply of production personnel, and the establishment of a win-win and development ecosystem. The creditors of DSME have already extended existing financial support, such as RG (Refund Guarantee), until the end of 2022 to ensure DSME can secure orders and operate normally.

A government official stated, "The government's consistent position is that finding a 'private owner' is necessary for the fundamental normalization of DSME," adding, "Based on consulting from external professional institutions, the Korea Development Bank (the major shareholder) plans to prepare a plan to strengthen DSME's competitiveness as soon as possible."

This content was produced with the assistance of AI translation services.