South Korea’s Fair Trade Commission (FTC) has approved energy and defence contractor Hanwha Group’s buyout of Daewoo Shipbuilding & Marine Engineering clearing the final hurdle for the takeover to go ahead.
On Thursday the FTC gave its conditional approval to the deal with the proviso that Hanwha take “corrective measures” to prevent potential anti-competition practices relating to its supply of military equipment.
Hanwha said: “We decided to accept the authorities’ decision from a broader viewpoint of quickly normalising the management of DSME and strengthening the national competitiveness through nurturing a core industry, despite the managerial limitations due to the conditional approval.
“We believe that we cannot miss that golden hour,” it said.
Hanwha has previously received the green light for the takeover from the European Union and six other countries — Japan, China, Singapore, Vietnam, Turkey and the UK.
The Korean conglomerate — now the country’s seventh largest — said it and its affiliates will take part in a KRW 2 trillion ($1.5bn) rights offering in May to acquire its planned 49.3% stake in DSME and will assume control of the shipbuilder.
The buyout includes a plan to rename DSME as Hanwha Ocean.
When concluded it will end a long-running battle to find a new owner for the shipbuilder — the fourth largest in the world and a specialist in LNG carrier construction — when it was spun off from the Daewoo Group in 2000.
Korea Development Bank’s 55.7% stake in DSME is set to be cut to 28.2% within the first half of this year.
KDB and the Export-Import Bank of Korea have agreed to extend soft loans to the shipbuilder for a short period following the buyout.
The FTC concerns regarding the buyout appear to centre around Hanwha’s defence interests.
News reports in Korea said the company holds a market share of over 50% in 10 key components used in military equipment.
The FTC has directed the conglomerate to report every six months for the next three years on the measures it is taking to discriminate against other rivals in the pricing of equipment for military vessels.
Hanwha must provide pricing information to rivals when requested via a government arms procurement site.
- 1973: Okpo shipyard built by Korea Shipbuilding & Engineering Corp
- 1978: Company becomes Daewoo Shipbuilding & Marine Engineering
- 1991: Daewoo Shipbuilding posts its first-ever profit
- 1999: Enters into workout programme after Asian crisis, Korea Development Bank (KDB) emerges as major shareholder.
- 2000: Daewoo Shipbuilding spun off from Daewoo Group
- 2001: Workout programme completed
- 2002: European Commission makes complaint to World Trade Organization (WTO) over corporate restructuring subsidies
- 2008: Hanwha Group bids for the company as KDB looks for buyer
- 2020: Japan complains to WTO over subsidies after second restructuring
- 2021: Proposed merger with Hyundai Heavy Industries blocked by European Union
- 2022: Strike disrupts production for more than 50 days
- 2022: Second Hanwha $1.4bn bid accepted
- 2023: South Korea's Fair Trade Commission approves Hanwha's acquisition of DSME
