Can-HHI-go-through-DSME-deal
DSME workers set up a tent ni front of the shipbuilder's head office in downtown Seoul to protest the firm's takeover by HHI.

Concerns rise on future of acquisition contract

Concern is rising as to whether Hyundai Heavy Industries (HHI) will be able to finish its acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) faced with the all-out opposition of its union members and checks by anti-trust agencies.

After HHI shareholders approved the first step necessary to take over DSME on May 31, company officials tried to carry out due diligence this week.

But they could not visit the DSME shipyards in Geojae, about 330 kilometers south of Seoul, because of a protest by DSME union members who chained themselves to gates and fences around the site.

Throughout last week, HHI union members also tried to prevent the shareholders’ meeting from taking place through sit-in strikes at the firm’s head office in Ulsan. In response, HHI changed the venue for the meeting that was held with heavy police protection.

Concerned about job security, members of the HHI union claim that the shareholder’s meeting was invalid, while vowing to tackle the takeover at any cost. The DSME trade union has the same stance.

Earlier this year, HHI signed a $1.7 billion deal with the Korea Development Bank to buy up DSME. The state-run lender holds a 55.7-percent stake in the cash-strapped DSME.

The consolidation between the world’s top two shipbuilders would give birth to a mega-sized outfit with a 21.2-percent market share of the global order book.

To complete the deal, HHI wants to split the shipyard into two outfits – a business firm and an intermediate holding company, which will acquire DSME.

The initiative is opposed not only by the unions but also from some experts.

“HHI seems to want to set up a new holding firm with great financial health. By handing out handsome dividends to its owner family, it may try to use the funds to transfer managerial rights to the next generation,” said a professor at a Seoul university.

The M&A also has to go through anti-monopoly reviews both at home and abroad. In particular, HHI needs to get the green light from China, Japan, the United States, and the European Union, which purchase a lot of ships from HHI and DSME.

China, Japan and the European Union are widely expected to raise worries about possible market monopoly. For instance, the two firms combine to account for more than 80 percent of the market in LNG carriers.

 

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