Singapore's antitrust regulator recently disclosed the reasons for agreeing to the merger of the two major Korean shipping companies. Singapore believes that in terms of the LNG ship market, which has the highest risk of monopoly after the merger, there is no monopoly concern because of the presence of competitors such as China's Hudong-Zhonghua and South Korea's Samsung Heavy Industries.
On February 23, the Competition and Consumer Commission of Singapore (CCCS) announced the reasons for approving the merger between Hyundai Heavy Industries Group and Daewoo Shipbuilding. The Commission pointed out that the market share is the main basis of the antitrust market review, but in the bidding for a cake in the shipbuilding market, should be more important to the existence of effective competitors.
The Commission divided the shipbuilding market into the areas of tankers, bulk carriers, container ships, LNG ships and LPG ships, focusing on whether the merger would raise the market entry barrier for other shipbuilders and affect the purchasing power of shipowners. The committee predicted that a physical merger of the two giants might make their market share rise by about 30% to 70% each, but the share in the shipbuilding market does not reflect market dominance, as the market share may change after the next tender.
Therefore, the Singaporean side believes that, considering this peculiarity of the shipbuilding market, as long as one effectively competing company can participate in the bidding, it can relieve the worries such as price hiking due to the abuse of market dominance caused by the merger of the two major Korean shipbuilders. Even in the LNG ship market, which has the highest risk of monopoly after the merger, the merged company will still face competitors such as Hudong-Zhonghua and Samsung Heavy Industries, so there is no monopoly problem.
According to the regulations, the merger of Hyundai Heavy Industries Group and Daewoo Shipbuilding must pass the anti-monopoly review of six countries and regions, 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. As of now, Kazakhstan, Singapore and China have unconditionally approved the merger of the two major shipbuilders, but only Singapore has announced the reasons for approving the merger.
The shipbuilding industry generally believes that Singapore's announcement of the reasons for approval will have a positive impact on antitrust reviews in other countries and regions, and Singapore's opinion can be interpreted to mean that even if Hyundai Heavy Industries Group and Daewoo Shipbuilding merge the two powers, the shipbuilding market can still maintain fair competition.
In the remaining three parties of the EU, Japan and South Korea, the EU's decision is the most critical. Affected by the epidemic, the EU has suspended the antitrust review of the merger deal between Hyundai Heavy Industries Group and Daewoo Shipbuilding three times in 2020. In October last year, Hyundai Heavy Industries Group has proposed some concession conditions to the EU Executive Committee, hoping that the EU side to complete the early approval.
The reason why the EU's attitude is so important is that the EU gathers major global shipowners, with global shipping companies in Greece, Norway, Denmark and Switzerland. The EU's competition bill is also more complicated than other countries. The Korean industry previously predicted that the EU may make a decision early this year, and if the EU approves it, Japan and Korea are likely to follow suit.
According to the plan, after the completion of the review in these countries and regions, Hyundai Heavy Industries Group and Korea Industrial Bank (KDB) will exchange mutually owned shares 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 manager). Earlier this year, Hyundai Heavy Industries Holdings Chairman Kwon Oh-gap said in his New Year's address that Hyundai Heavy Industries is expected to complete the acquisition of Daewoo Shipbuilding in the first half of this year.
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