E.U. Commission Investigates Proposed Acquisition of DSME

The European Commission has opened an in-depth investigation to assess the proposed acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) by another shipbuilding group, Hyundai Heavy Industries Holdings (HHIH), under the E.U. Merger Regulation. The Commission is concerned that the merger may reduce competition in various global cargo shipbuilding markets.

If the $1.8 billion deal goes ahead, the merged company would have a 21 percent market share.

Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “Cargo shipbuilding is an important industry for the European Union. Maritime transport represents a substantial portion of the E.U.'s internal and external freight trade, with European shipping companies regularly purchasing vessels from DSME and HHIH, two of the leading cargo shipbuilders in the world. This is why we will carefully assess whether the proposed transaction would negatively affect competition in the construction of cargo ships, to the detriment of European consumers.”

Maritime transport represents about 30 percent of E.U. internal freight trade and 90 percent of E.U. external freight trade. European shipping companies are major customers of DSME and HHIH and represent 30 percent of worldwide demand for cargo ships.

In particular, the Commission is concerned about the market for large container ships, oil tankers, LNG carriers and LPG carriers. It says it is unlikely that a timely and credible entry from other shipbuilders would counteract the possible negative effects of the takeover which could lead to higher prices, less choice and reduced incentives to innovate.

The Commission now has 90 working days, until May 7, 2020, to take a decision.

The takeover is also being reviewed by competition regulators in South Korea, Singapore, China and Japan.