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KDB, Hyundai Heavy consider alternative steps to expedite acquisition of Daewoo Shipbuilding

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Hyundai Heavy Industries shipyard in Ulsan / Courtesy of Korea Shipbuilding & Offshore Engineering
Hyundai Heavy Industries shipyard in Ulsan / Courtesy of Korea Shipbuilding & Offshore Engineering

By Kim Hyun-bin

State-run Korea Development Bank (KDB) and Hyundai Heavy Industries (HHI) are considering alternative steps to speed up HHI's acquisition of cash-strapped Daewoo Shipbuilding & Marine Engineering (DSME) amid the EU's concerns over a monopoly. HHI, which seeks to acquire KDB's stake in DSME, is considering selling off some of its own units to assuage the EU's worries.

HHI's suggested acquisition of cash-strapped DSME needs approvals from anti-trust agencies in different countries with the European Union (EU) holding the key. The EU has yet to approve the HHI-Daewoo deal in what analysts and officials say is due to the union's worries over the possible monopolization of the liquefied natural gas (LNG) industry if HHI ends up owning DSME.

Analysts said Wednesday that both KDB and HHI have no choice but to sell off the shipbuilder's LNG division as well as putting other affiliates up for sale, because the approval delays are mostly due to the EU's requirements for remedial plans.

From HHI's standpoint, selling off its LNG business division could be a tough decision and it is aiming to sell its stakes in affiliates including Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries as a remedy to ease the EU's worries of a potential monopoly.

KDB's decision-making executives are involved in discussions with the KFTC to persuade the country's top anti-trust regulator to aid the acquisition efforts.

"When EU competition authorities try to regulate Big Tech platforms such as Amazon, Google, Facebook, the U.S. competition authorities protect them. But our country just sits back and waits until other countries make their decision, which is unfortunate," KDB Chairman Lee Dong-gull recently said.

The continued delay in the decision by the EU has worsened the situation for KDB and HHI as DSME's profitability continues to slump. DSME's sales dropped 44.7 percent in the first half of this year compared to the same period last year.

KDB is said to have halted the process of HHI's acquisition of DSME.

In February 2019, HHI agreed to buy KDB's stake in DSME. In the same year, KDB and HHI applied to have the deal approved by six countries, but has yet to receive the green light from the EU, Japan and Korea.

"With European shipping companies regularly purchasing vessels from DSME and HHI, two of the leading cargo shipbuilders in the world, we will carefully assess whether the proposed transaction would negatively affect competition in the construction of cargo ships, to the detriment of European consumers." EU Commission's Executive Vice President Margrethe Vestager said in June this year.



Kim Hyun-bin hyunbin@koreatimes.co.kr


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