KDB considers alternative steps to speed up sale of Daewoo Shipbuilding

KDB considers alternative steps to speed up sale of Daewoo Shipbuilding

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 the acquisition of cash-strapped Daewoo Shipbuilding & Marine Engineering (DSME).

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 decision process by the EU has made the situation much worse for the KDB and HHI as DSME profitability continues to slump recently. DSME sales dropped 44.7 percent in the first half of this year compared to the same period last year.

The KDB is said to have put an all stop to the DSME acquisition procedures. In February 2019, the KDB and HHI agreed to conduct an M&A of DSME and in the same year applied to get an acquisition approval from six countries, but has yet to receive an approval from the EU, Japan and Korea.

The initial focus of the acquisition review between them was expected to bolster the merged entity’s bargaining power in the container ship building business. However, the solid growth of the LNG carrier market has been raising possible monopoly concerns.

“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.

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