Hyundai’s $1.8 billion deal with Daewoo faces EU probe

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World No. 1 shipbuilding group Hyundai Heavy Industries Holdings’ $1.8 billion merger with competitor shipbuilder Daewoo will deal with a full-scale investigation in Europe because of severe EU antitrust concerns, two people knowledgeable with the matter stated on Monday. 

Hyundai in January declared the deal to form the world’s biggest shipbuilder with a 21 percent market share, in part a response to over-capacity in the industry.

The European Commission will carry out an investigation into the deal next week after a preliminary review which ends on December 17, the people stated.

A full-scale investigation can consume about five months and in most cases ends with companies forced to sell off assets or shift technology or contracts to competitors to address competition concerns.

The EU competition enforcer refused to comment. The deal also needs regulatory clearance in South Korea, Singapore, China, and Japan. Kazakhstan has already provided the green light. Hyundai last week stated that it was working with Singapore’s regulators to resolve their concerns.

“We will do our best to get approval without any problems,” a Hyundai Heavy Industries spokesman stated on Monday. State-funded Korea Development Bank (KDB) has 55.7 percent of Daewoo Shipbuilding and Marine Engineering, which has earlier rejected to comment beyond saying that Hyundai was leading the regulatory process.

Hyundai is looking forward to convincing EU regulators to take into account the competitive threat from the merged China Shipbuilding Industry Corp (CSIC) and China State Shipbuilding Corp, other sources stated previously, an entity with sales more than three times its own.

The two Korean shipyards have stated they will rival independently after merging, with each company able to negotiate their own contracts with consumers and providers.

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