이 기사는 2021년 10월 19일 08:05 thebell 에 표출된 기사입니다.

An attempt by South Korea’s Hyundai Heavy Industries Group to buy rival Daewoo Shipbuilding & Marine Engineering through its intermediary holding company, Korea Shipbuilding & Offshore Engineering, is complicated by a lengthy antitrust review in Europe, Japan and South Korea, causing the deal’s deadline to be delayed four times in the past two and a half years.

The 2 trillion won ($1.7 billion) deal, announced in March 2019, is subject to antitrust regulatory review in South Korea, China, Japan, the European Union, Singapore and Kazakhstan.

The industrial giant already received the green light for the deal from Kazakhstan, China and Singapore. Meanwhile, antitrust review is still pending in the EU, Japan and South Korea.

The EU’s antitrust examination of the deal was put on hold more than a year ago due to the Covid-19 pandemic and has not been resumed yet. Even if the review process restarts, the results are less likely to be in favor of the deal as the EU is one of the regions with the most active antitrust enforcers and well developed antitrust systems.

From the beginning, the EU’s antitrust regulator has expressed concerns over the deal, saying the combination of the two South Korean companies could reduce competition in the global shipbuilding market. Several countries in the EU, such as Greece, Germany and Norway, are home to some of the world’s biggest shipping companies. Especially, Norwegian shipping companies are the third largest customers for South Korean shipbuilders.

Recent data from Clarkson Research appears to support the EU’s concerns. According to the shipping data firm, 45 liquefied natural gas (LNG) vessels were ordered globally in the first nine months of this year, 42 of which were ordered with South Korean shipbuilding companies, accounting for a market share of more than 90%. An increase in demand for LNG ships has also led to rising vessel prices.

“Korea Shipbuilding & Offshore Engineering earlier suggested possible ways that could mitigate the EU’s antitrust concerns, such as technology transfer,” said an industry insider. “But the EU wants stronger action such as selling part of the company’s business, which is difficult to be accepted by Hyundai Heavy.”

Japan’s antitrust review of the deal is also dragging on, which many industry watchers say is largely related to a longtime rivalry between the two countries in the global shipbuilding market. Japanese companies had maintained the dominance in the market for 30 years from the 1960s, but from the 1990s, South Korean shipbuilding companies started to outstrip Japanese rivals.

The combination of Korea Shipbuilding & Offshore Engineering and Daewoo Shipbuilding & Marine Engineering would create a formidable South Korean shipbuilding champion, which would further widen the gap between South Korean and Japanese shipbuilding companies.

Meanwhile, South Korea’s competition watchdog, Korea Fair Trade Commission (KFTC), faces a major dilemma, which is a big reason for the delay in its ruling on the deal. Full clearance by the KFTC could be seen by other countries as giving favor to companies in its own country. However, giving conditional approval could be at odds with the deal’s purpose – which is to achieve economies of scale – especially given that the deal was led by the South Korean government.

“We intend to complete the regulatory review of the big deals in the airline and shipbuilding industries before the end of the year,” Joh Sung-wook, KFTC’s chairperson, told lawmakers during a 2021 inspection of state administration.

The deal’s deadline has been pushed back to December 31, 2021. Some are concerned that if further delayed, the deal could fall through amid growing uncertainty surrounding the deal’s fate as the South Korean presidential election nears.

“We will make our best efforts to complete the acquisition smoothly,” an official at Korea Shipbuilding & Offshore Engineering said. (Reporting by Eun-a Jo)