DSME logo. (DSME)
Daewoo Shipbuilding & Marine Engineering is in search of a new owner again after a merger plan with its larger rival Hyundai Heavy Industries failed due to an EU veto on monopoly concerns.
The European Commission announced Thursday its prohibition for the merger, claiming that the deal could reduce competition in the global LNG carrier market amid soaring energy prices.
Back in 2019, Hyundai Heavy announced it would acquire a 55.7 percent stake in Daewoo Shipbuilding from its largest shareholder Korea Development Bank for 2 trillion won ($1.68 billion). Their merger could have created the world’s largest shipbuilder with some 60 percent market share in the lucrative global LNG ship market alone.
Antitrust regulators in six rival countries started their own review for the deal, with three countries, including China, Singapore and Kazakhstan, approving the deal thus far.
Hyundai Heavy expressed regret over the EU decision, saying market share is not a key factor in the bidding-based shipbuilding industry where the figures always change as the results of new biddings.
The firm added it would consider countermeasures, including filing a complaint to the European Commission.
But with the veto of EU, the world’s largest shipbuilding market, the two firms said they were withdrawing their antitrust filings for the merger deal.
In the meantime, the state-run KDB said it would continue efforts to find a new owner of the company.
“Our stance remains unchanged that finding a private owner is necessary to fundamentally normalize the company,” said the government in a statement jointly released by related ministries on Thursday.
Samsung Heavy Industries is cited one of the potential buyers but the shipbuilder also faces financial difficulties as it has recorded operating loss for six years in a row until 2020. And the merger with the shipbuilder would not be free from antitrust scrutiny by rival countries.
Finding a new owner outside the industry may take longer, industry watchers say, since a buyout deal could come with a huge financial burden as the order-based shipbuilding market is highly sensitive to the global economy.
The government is expected to unveil its plans to enhance the competitiveness of DSME as early as this month. Creditors have already extended financial support for the troubled shipbuilder until the end of this year.
Korea is home to the world’s three largest shipbuilders – Hyundai Heavy, Samsung Heavy and Daewoo Shipbuilding.
By Hong Yoo (firstname.lastname@example.org