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European Commission Opens Investigation Into Proposed Acquisition Of DSME By HHIH

The merger may reduce competition in various global cargo shipbuilding markets

The European Commission has opened an in-depth investigation to assess the proposed acquisition of Daewoo Shipbuilding & Marine Engineering CO., Ltd (DSME) by another shipbuilding group, Hyundai Heavy Industries Holdings (HHIH), under the EU Merger Regulation

The Commission is concerned that the merger may reduce competition in various global cargo shipbuilding markets.

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 EU’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.”

Cargo shipbuilding is an important industry for the EU. Maritime transport represents about 30% of EU internal freight trade and 90% of EU external freight trade. European shipping companies are major customers of DSME and HHIH and represent 30% of worldwide demand for cargo ships.

The Commission’s preliminary competition concerns

Following its preliminary market investigation the Commission has concerns that the proposed transaction may remove DSME as an important competitive force in the following markets: (i) large containerships, (ii) oil tankers, (iii) liquefied natural gas (LNG) and (iv) liquefied petroleum gas (LPG) carriers. The Commission has concerns that the remaining shipbuilders would not exert sufficient competitive pressure on the merged entity in the four markets concerned by the transaction. It also has concerns that the customers would not have sufficient bargaining power to constrain the merged entity.

Merger control rules and procedure

The Commission has the duty to assess mergers and acquisitions that have been referred to it by EU Member States and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to the current transaction, there are four ongoing Phase II merger investigations: the proposed acquisition of Metallo by Aurubis, the proposed acquisition of Chantiers de l’Atlantique by Fincantieri, the proposed creation of two joint ventures by Boeing and Embraer and the proposed acquisition of Lotos by PKN Orlen.

Reference: ec.europa.eu

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