Hyundai Heavy Industries Group has obtained approval from Kazakhstan of its plan to merge with Daewoo Shipbuilding & Marine Engineering (DSME).
Kazakhstan is the first country to approve the merger plan. Hyundai Heavy Industries Group said on Oct. 29 that Kazakhstan authorities approved its plan with no strings attached.
The group is currently undergoing a review of its merger plan in five countries including Korea, the European Union, Japan, China and Singapore. In Korea, a review is being carried out by the Korea Fair Trade Commission. The EU is holding the key to the merger plan as it has the most developed competition law in the world. The EU will complete a preliminary screening of the plan soon, so the Hyundai Heavy Industries Group will apply for a review in early November at the earliest.
Merger plans involving big companies are subject to reviews by fair trade authorities of each country as they can affect the global market. Hyundai Heavy Industries Group accounts for 13.9 percent of the global shipbuilding market, while DSME controls 7.3 percent. If any of the countries reviewing their merger proposal refuses to endorse it, the plan will go down the drain.
Industry analysts expect that the rest of the countries will pass the merger plan. In particular, as China approved the merger of China State Shipbuilding Corp. (CSSC) and China Shipbuilding Industry Corp. (CSIC) on Oct. 25, it will approve Hyundai Heavy Industries Group’s merger with DSME. But some experts say that Japan may not approve the merger plan in light of the worsened economic relationship between Koran and Japan.
In fact, Japan filed a formal complaint with the World Trade Organization (WTO) last year saying that the Korean government's shipbuilding restructuring measures caused damage to the Japanese shipbuilding industry. However, Hyundai Heavy Industries Group is confident that there will be no problem in receiving approval from Japan. "I do not expect Japan to reject our merger plan," Ka Sam-hyun, president of Hyundai Heavy Industries, told reporters in September.
Along with receiving approval from the Japanese authorities, Hyundai Heavy Industries has to solve the other big problem –- an opposition from its unionists. The labor union flew into Brussels in Belgium where the Directorate General of Competition of the EU is located and insisted that the Directorate General of Competition reject the merger.
If Hyundai Heavy Industries Group acquires DSME, its share in the LNG carrier market will surpass 50 percent, which is also a major concern.