Signs seem to suggest the merger between HHIH and DSME may not happen
Last July, all eyes were on 2 Korean heavyweights’ merger, wondering if that would even happen. Hyundai Heavy Industries Holdings Company (HHIH) was planning to acquire Daewoo Shipbuilding & Marine Engineering Company (DSME). However, it can only take place upon approvals from South Korea, the European Union (EU), Japan, China, Singapore, and Kazakhstan. HHIH had to date received approvals from only 3 countries; China, Kazakhstan and Singapore.
The industry watched on as the EU adjourned its decision for the 4th time. The EU and Korea are important trade partners; Korea is the EU’s 9th largest export market for goods, and the EU is Korea’s 3rd largest export destination. Both signed a free trade agreement which came into effect at end of 2011. The union between HHIH and DSME would be a force to reckoned with if it comes to pass. Media reports noted this new entity would command 21 per cent market share in its position as the world’s biggest shipbuilder.
The turn of events came when unionised workers at DSME launched a protest rally against the acquisition early September 2021. Kang Ju-yong, an official from the labour union said, “We opposed to the deal as it was made by behind-the-scene talks, not by open bidding, and will cut our jobs undermining job security.” He added the deal will stifle about DSME’s 1,240 suppliers, because HHIH’s shipbuilders have been supplied ship parts by their own affiliates.
A clear signal
What seemed to underscore DSME’s determination to not be acquired was its inking a KRW 990 billion (US$845 million) order to build four liquefied natural gas (LNG) carriers. Under the deal with an Asian company, DSME will deliver the 174,000mᶟ LNG carriers by October 2024. The company revealed this latest order totals up to US$8.04 billion in new orders for DSME, surpassing the annual target of US$ 7.7 billion.
Putting two and two together, DSME’s steady recovery is a strong message to HHIH to re-consider this acquisition. Meanwhile EU is probably heaving a sigh of relief given its glaring apprehension about competition and monopoly.
Marine Online News Team
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