Hyundai Heavy starts process to seek regulatory approval for Daewoo takeover

SEOUL, April 12 (Yonhap) -- Hyundai Heavy Industries, the world's largest shipbuilder, has started the process to seek approval from foreign regulators for its proposed takeover of Daewoo Shipbuilding and Marine Engineering Co., industry sources said Friday.

In March, Hyundai Heavy signed a formal deal, worth an estimated 2 trillion won (US$1.75 billion), with state-run Korea development Bank (KDB) to buy the smaller local shipbuilder. The bank is the largest shareholder of Daewoo, with a controlling 55.7-percent stake in the company.

Hyundai Heavy said that it will submit a request asking for formal approval from South Korea's Fair Trade Commission next month. That will be followed by similar requests being sent to antitrust watchdogs in 10 countries in June.

Winning regulatory approval from domestic and foreign corporate regulators has been regarded as one of key hurdles facing Hyundai Heavy's efforts to complete the merger, given the dominant market position the newly merged company would have.

The sticking point is to win approval from European Union (EU) regulators, which have already said that approving any mergers between Hyundai Heavy and Daewoo depends on whether or not such a development hurts consumers. China and Japan, major competitors in the shipbuilding sector, also are expected to try to stall the approval process.

But Hyundai Heavy is confident of clearing the remaining hurdles to win approval from foreign regulatory bodies.

Hyundai Heavy's chief finance officer, Cho Young-chul, said in a recent meeting with market analysts that there seems to be no serious obstacles to getting approval from foreign regulators if outstanding concerns are addressed.

If the takeover goes forward without a hitch, the South Korean shipbuilding industry is expected to be controlled by Hyundai Heavy and Samsung Heavy Industries Co.

The combination of the two shipbuilders would create an unrivaled player in the sector.

As of last year, Hyundai Heavy had an order backlog totaling 11.14 million compensated gross tons (CGTs), the largest among others in the sector. The comparable figure for Daewoo Shipbuilding was 5.84 million CGTs.

Their combined order backlog accounts for 21.2 percent of the global total.

Besides winning foreign regulatory approval, Hyundai Heavy said once the general meeting of shareholders, set for May 31, passes the so-called physical division motion of the company, steps will be taken to restructure its operations. The reorganization will take place independent of the merger with Daewoo Heavy.

Under the plan, shipbuilding, special vessel construction, marine plant, engines and machinery businesses will be grouped into a newly formed Hyundai Heavy Industries, with remaining operations to form a new shipbuilding and marine engineering company.

yonngong@yna.co.kr
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