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Hyundai Heavy Industries officially withdraws from its takeover of Daewoo Shipbuilding

Hyundai Heavy Industries Group has officially suspended the process of acquiring Daewoo Shipbuilding & Marine Engineering. The plan is to file a complaint with the European Union (EU) court to examine the legitimacy of the EU’s decision to oppose the merger (merger) of the two companies.

Korea Shipbuilding & Marine Engineering, an intermediate holding company in the shipbuilding division of Hyundai Heavy Industries Group, voluntarily withdrew its business combination report submitted to the Fair Trade Commission on the 14th. It comes one day after the European Commission’s decision to disapprove the merger between the two companies the day before. Immediately after the EU decision, the Fair Trade Commission decided to stop reviewing the merger between the two companies. Although the acquisition contract between Hyundai Heavy Industries Group and Korea Development Bank, the largest shareholder of Daewoo Shipbuilding & Marine Engineering, signed in 2019 has not been canceled, in fact, it has been completely canceled.

Regarding the withdrawal of the report, Hyundai Heavy Industries Group said it was “an inevitable choice.” When signing the acquisition agreement with Hyundai Heavy Industries Group and Korea Development Bank, the precondition was the approval of six foreign competition authorities. It is judged that there is no real benefit in proceeding with the remaining acquisition process in a situation where the EU, the largest ship orderer, has made a decision against it.

However, the Hyundai Heavy Industries Group explained that the withdrawal of the report does not mean that the EU’s decision is accepted. The company has not yet received a final notice from the EU Commission about the disapproval. Hyundai Heavy Industries Group plans to respond to requests for correction through EU courts after reviewing the final notice. The industry and the government believe that the probability of winning a lawsuit against the EU competition authority is around 10%. A government official said, “If you look at past cases, it will not be easy because it takes a long time and there are very few cases that have been reversed.”

Nevertheless, Hyundai Heavy Industries Group is taking the position that it is necessary to counter the monopoly logic presented by the EU Commission. If the EU’s logic, which judged whether there is a monopoly in an industry based on the current market share in a specific ship type, remains as a precedent, it is judged that it could become an obstacle to the reorganization of the domestic shipbuilding industry in any form. An official from Hyundai Heavy Industries Group said, “The original purpose of the Korean shipbuilding industry has not changed unless excessive competition between domestic companies disappears.

On the other hand, Japan, a competitor, is in an atmosphere of antipathy to the failure of the merger. The Yomiuri Shimbun reported on the 15th that in relation to the EU decision, an official from a Japanese shipbuilding company gave a reaction that “it is a plus for Japan in that normal competition is maintained”. It is analyzed that if the merger of the two companies had created an overwhelming ‘mega shipbuilding company’, the possibility of Japan’s pursuit of Korea and China would have disappeared.

Reporter Hwang Jung-hwan [email protected]

ⓒ Hankyung.com, unauthorized reprinting and redistribution prohibited

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