Korea Development Bank Chairman Lee Dong-gull speaks at a government audit held at the National Assembly, Friday. Korea Times photo by Bae Woo-han
By Kim Hyun-bin
State-run Korea Development Bank (KDB) and Hyundai Heavy Industries (HHI) have encountered major hurdles in the shipbuilder’s acquisition of rival Daewoo Shipbuilding & Marine Engineering (DSME) because of pending approval from foreign antitrust regulators and mounting opposition from DSME’s labor union.
Unfazed by such challenges, the state-run bank, also the largest shareholder of DSME, said it plans to push ahead with the deal as scheduled, while aiming to receive all necessary approvals by the end of this year.
On the sidelines of a National Assembly audit of the state-run bank, KDB Chairman Lee Dong-gull apologized for the three-year delay in the acquisition. “We apologize for the delays in receiving approval for the acquisition,” Lee told lawmakers.
When asked about the possibility of alternative options should the EU fail to authorize the deal, the KDB chief said there are several factors that make it difficult for DSME to recover on its own despite an increase in sales in recent months, stressing the state-run bank’s intention to push ahead with the planned acquisition.
“When reviewing diverse alternatives, it is important to look into the possible self-sustainability of DSME. There has been a temporary rise in procurements, but the shipbuilder still shows large deficits and vulnerable aspects in terms of basic competitiveness. So when conducting a review, we need to consider both the company’s competitiveness and the industrial structure,” Lee said.
HHI still needs to gain the approval of the EU, Japan and South Korea. The EU holds the key to the deal, but is also concerned that its approval may help the combined HHI-Daewoo obtain huge bargaining power in terms of its share of the lucrative liquefied natural gas (LNG) vessel market.
KDB is teaming up with HHI and the country’s antitrust agency to pressure the EU to give even a “conditional approval” by the end of this year as continued LNG price growth and boom in the shipping industry increases concerns over monopolization. Also behind the concerted effort is the bank’s optimism over the general outlook for the global shipbuilding and shipping industries over the next few years. Also, the KDB chief is said to be inclined to resolve the issue before President Moon Jae-in’s term ends next March.
The KDB chairman openly showed his uneasiness over the Korea Fair Trade Commission’s (KFTC) muted stance on the issue, pressuring the regulator to take a more active stance. But the KFTC’s active intervention could spark concerns over the preferential treatment of Korean companies.
The continued delay in the EU’s decision has worsened the situation for KDB and HHI as DSME’s profitability continues to slump. DSME’s first-half sales dropped 44.7 percent year-on-year to 2.17 trillion.Internet Explorer Channel Network