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Singapore competition authority clears merger of DSME and KSOE

Photo: Lee Hong Liang IMG_0665.JPG
The Competition and Consumer Commission of Singapore (CCCS) has cleared the proposed merger between two South Korean shipyards, Korea Shipbuilding & Marine Engineering Co (KSOE) and Daewoo Shipbuilding & Marine Engineering (DSME).

During its in-depth review, CCCS said it was unable to conclude that the proposed merger will not result in a substantial lessening of competition that would become detrimental to customers in Singapore.

“The parties overlap in the global supply of commercial vessels, including oil tankers, containerships, LNG carriers and LPG carriers,” CCCS stated.

The CCCS considered that the relevant markets are the global supply of vessels such as the 200,000 dwt ultra-large VLCCs, the 15,000 teu post-panamaxes, the 40,000 cu m LNG carriers, and the 60,000 cu m LPG carriers.

The CCCS assessment states that barriers to entry and expansion are generally high, customers have buyer power to constrain the merged entity from exercising its market power, and the two parties are close competitors to each other particularly in the 200,000 dwt ultra-large VLCC and 40,000 cu m LNG carrier markets.

“While market concentrations in the relevant markets will be high post-merger, the evidence does not indicate that the proposed transaction will result in coordination or collusion on prices as shipbuilders tend to have private negotiations with customers, which limit price transparency. Shipbuilders may also find it difficult to coordinate on prices as customers perceive differences in quality and experience of shipbuilders,” CCCS wrote.

“After evaluating all the evidence available, CCCS assessed that the proposed transaction, if carried into effect, will not lead to a substantial lessening of competition in Singapore.”

KSOE encompasses subsidiaries Hyundai Heavy Industries, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries.

In March 2019, Hyundai Heavy Industries (HHI) Group and Korea Development Bank signed an agreement to acquire DSME. The terms of the agreement saw KSOE established as a sub-holding company spun off from HHI to control the group’s shipbuilding companies. The strategy is to eventually control four shipyards including DSME.

KSOE and DSME, along with Samsung Heavy Industries (SHI), have been Korea’s three biggest shipbuilders, as they all faced the same struggles of intense competition from Chinese shipbuilders and a dearth of new orders in the offshore oil and gas market.

The proposed shipyards’ merger still requires clearance from the European Commission (EC). Due in part to delays as a result of the coronavirus (Covid-19) pandemic, the EC’s decision has been postponed.

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