After nearly a year and a half, the merger deal between two major South Korean shipping companies Hyundai Heavy Industries Group and Daewoo Shipbuilding finally received unconditional approval from Chinese regulators, marking another major step on the road to the merger of the two major shipping companies.
On December 28, Hyundai Heavy Industries Group is responsible for the shipbuilding business of the secondary holding company Korea Shipbuilding Marine, said that it has received from the Chinese antitrust regulator on the company and Daewoo Shipbuilding corporate merger "unconditional approval" notification. This is the third country, after Kazakhstan and Singapore, to approve the merger of two major Korean shipbuilders.
China's State Administration of Market Regulation (SAMR) said in the notification, "According to the results of the discussion under Article 26 of the Chinese Antimonopoly Law, there is no restriction of market competition between the two companies arising from the corporate merger."
Korea Shipbuilding & Marine applied to China for a business merger review in July last year. It then went through three stages of review and finally received unconditional approval after one year and five months. The Korean industry had previously feared that it would be difficult for the merger of two major Korean shipbuilders to obtain approval from Chinese antitrust regulators, as China is the largest competitor of Korea in the global shipbuilding market. Therefore, this time, after receiving China's approval, the Korean industry has commented that the Chinese government's approval is significant.
According to the requirements, the merger of Hyundai Heavy Industries Group and Daewoo Shipbuilding must pass the antitrust review of six countries, including South Korea, the European Union, Japan, China, Kazakhstan and Singapore. As long as one of the countries opposed, Hyundai Heavy Industries Group's plan to acquire Daewoo Shipbuilding will actually be lost. So far, three countries have approved the merger of two major Korean shipping companies, including Kazakhstan in October last year and Singapore in August this year, as well as the latest approval of China. Antitrust regulators in the EU, South Korea and Japan are in the process of reviewing it.
According to Korea Shipbuilding & Marine, the "unconditional approval" of China's anti-monopoly regulator was finally obtained thanks to the company's positive explanation of market monopoly and other issues. The successive unconditional approval of the merger of two major Korean shipbuilders by Kazakhstan, Singapore and China will also have a positive impact on other countries that are still reviewing the merger case.
The merger of the two major South Korean shipbuilders was originally planned to be completed within this year, however, affected by the epidemic, the EU has suspended the anti-monopoly review of the merger deal between Hyundai Heavy Industries Group and Daewoo Shipbuilding three times this year. In October this year, the South Korean shipbuilding ocean has proposed to the EU Executive Committee part of the concession conditions, hoping that the EU side early completion of the approval. The Korean industry predicts that the EU may make a decision early next year, and if the EU approves it, Japan and South Korea are likely to follow suit.
The reason why the EU's attitude is so important is that the EU is home to major global shipowners, with global shipping companies in Greece, Norway, Denmark and Switzerland. The EU's competition bill is also more complex than that of other countries. Sources say the EU review will focus on whether the merger will harm competition in the market for LNG vessel construction. Once merged, the two companies will have up to 60 percent of the LNG ship market, much higher than their 21 percent share of the overall shipbuilding market.
A source related to Korea Shipbuilding & Marine said, "In the future, we will do our best to successfully complete the corporate merger review by carefully explaining relevant matters in accordance with the review schedule and procedures of the antitrust regulators in the remaining three countries, including the EU, Korea and Japan."
According to the plan, after the completion of the review in these countries and regions, Korea Shipbuilding & Marine and Korea Industrial Bank (KDB) will exchange their mutually owned shares of Korea Shipbuilding & Marine and Daewoo Shipbuilding to complete the corporate merger process. In connection with this, Hyundai Heavy Industries Group will materially divide the existing Hyundai Heavy Industries into Korea Shipbuilding & Marine (the surviving corporation) and Hyundai Heavy Industries (the new managing agent).
