Monday, June 1, 2020
Japan Begins Review on Merger of Hyundai Heavy Industries and DSME
Conclusion Expected to Come in 2nd Half of 2020
Japan Begins Review on Merger of Hyundai Heavy Industries and DSME
  • By Jung Suk-yee
  • March 3, 2020, 10:56
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A dockyard of Hyundai Heavy Industries in Ulsan

Japan is conducting a review of the proposed merger between Hyundai Heavy Industries Group and Daewoo Shipbuilding & Marine Engineering (DSME).

The Japan Fair Trade Commission has started the first stage of a review on the business combination between Hyundai Heavy Industries Group and DSME after receiving a proposal from Korea Shipbuilding & Offshore Engineering (KOSE) on Feb. 25. Previously called Hyundai Heavy Industries Co., KOSE submitted the merger plan to the Japanese commission in September last year. If Japan proceeds to the second round of the review like fair trade authorities in the EU and Singapore, it is expected to  reach a conclusion in the second half of this year.

In November 2018, Japan filed a complaint against DSME at the World Trade Organization (WTO), claiming that DSME distorted market prices by taking shipbuilding orders at low prices after the Korean government injected about 1.2 trillion won in public funds in the troubled shipbuilder. Later, in December of the same year, bilateral talks were held in Seoul, and Japan put on hold its request to set up a WTO panel. Japan filed an additional complaint with the WTO in February this year, asserting that the public funds provided by the Korean government to the shipbuilding industry were unfair subsidies. Japan called for bilateral consultation, which is the first step taken in a WTO dispute settlement process.

As a result, industry watchers expressed concerns that the Japanese government might take issue with the merger process between Hyundai Heavy Industries Group with DSME.

They forecast that the merger process, which was originally expected to be completed in the first half of this year, will be extended until the end of this year. A dominant forecast is that the outcome of the EU Commission's review will come out this June or July.

At present, Hyundai Heavy Industries Group’s merger plan is under review by fair trade authorities in five countries: the EU, Singapore, Korea, Japan, and China. So far, only Kazakhstan has approved it.