Fair Trade Commission Approves Jungheung-Daewoo Corporate Merger... Closing the 2.1 Trillion Won Deal

Jungheung Group Headquarters

[Asia Economy Sejong=Reporter Dongwoo Lee] The Korea Fair Trade Commission (KFTC) has approved the merger between Jungheung Group and Daewoo Engineering & Construction.

On the 24th, the KFTC gave final approval for the acquisition of 50.75% (totaling 2.067 trillion KRW) of Daewoo E&C shares by Jungheung Togeon and Jungheung Construction, judging that there are minimal concerns about competition restrictions.

The KFTC explained that due to the nature of the comprehensive construction market, where contracts are mainly awarded through competitive bidding, it is difficult for the merged company to unilaterally raise prices, thus posing little risk of competition restriction. After the merger, the company will rank 4th in market share based on construction capability evaluation (3.99%), and the gap in market share with competitors ranked 5th or lower is not significant.

According to the KFTC, the rankings in the construction sector are Samsung C&T (Raemian, 8.96%), Hyundai Engineering & Construction (Hillstate, 8.12%), GS Engineering & Construction (Xi, 4.02%), POSCO Engineering & Construction (The Sharp, 3.72%), Daewoo E&C (Prugio, 3.18%), Daelim Industrial (e-Pyeonhansesang, Acro, 3.17%), Lotte Engineering & Construction (Lotte Castle, 2.37%), SK Engineering & Construction (SK View, 2.02%), HDC Hyundai Development Company (IPARK, 1.47%), Hanwha Engineering & Construction (Kkumegreen, 1.35%), and Jungheung Construction (0.81%).

The KFTC also stated that even when subdividing the comprehensive construction market into civil engineering and architecture, industrial environmental facilities, and landscaping construction markets, this merger meets the safe harbor criteria in each submarket. The safe harbor means that if the market concentration after the merger is below a certain threshold, it is presumed that there is no competition restriction, and the merger is approved after only verifying market share and related procedures.

In the real estate development and supply market, where about 2,400 businesses compete, the merged company's market share will be 2.02% (ranked 8th), which is minimal, and the gap in market share among leading companies is also not significant, according to the KFTC.

The merger will create a vertical integration in the markets including comprehensive construction and real estate development and supply. However, the KFTC judged that many competitors exist in the processes of construction, project implementation, sales, and leasing of buildings, keeping the market share low.

The KFTC viewed this merger as a combination between medium-to-large comprehensive construction companies, expecting Jungheung Construction to expand and strengthen its core business from primarily domestic housing construction to various fields such as overseas civil engineering, plants, and new industries.

The KFTC stated, "We plan to actively address any concerns that may arise from the creation of a new large construction company through this merger by thoroughly enforcing relevant laws such as the Fair Trade Act and the Subcontracting Act."

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