Following the final approval of Hanwha Group’s acquisition of HSD Engine, the Korea Fair Trade Commission (KFTC) will make a decision on the takeover of STX Heavy Industries submitted by HD Korea Shipbuilding & Offshore Engineering (HD KSOE), the intermediate holding company for HD Hyundai Group’s shipbuilding business, in July this year.
In response to HD KSOE’s acquisition of STX Heavy Industries, the Korean shipbuilding industry is concerned about “monopolization” and stated in its submission to the KFTC earlier this year that “there may be a risk of competition restriction in the event of a merger between HD Hyundai Heavy Industries, which has the largest market share in the global marine engine market, and STX Heavy Industries, which has the third largest market share. Taking the crankshaft, a major component of Marine engines, as an example, the market share of the two companies is close to 100%.” In this case, even if the KFTC approves the merger, it is likely that conditions will be attached to remove competition restrictions.
Korean media reported that the KFTC will also have concerns about competition restrictions on HD KSOE’s acquisition of STX Heavy Industries. The company filed the relevant merger application in August 2023 and was originally scheduled to receive merger approval earlier this year, but it has been delayed until July of this year.
KFTC officials explained, “We are reviewing the HD KSOE-STX Heavy Industries merger and closely analyzing the competition restrictions with a view to making a decision by the end of July.”
The potential for monopolization in the Marine engine market is a major concern for the KFTC. HD Hyundai Heavy Industries, a subsidiary of HD KSOE, has the largest share of the marine engine market, followed by HSD Engine, which has been acquired by Hanwha Group, and STX Heavy Industries, which will be acquired soon.
Upon completion of the acquisition, HD KSOE will hold a 35% stake in STX Heavy Industries, and the two companies will have a 50% share of the marine engine market, with a majority of the market share in crankshafts, the main component of marine engines.
The two companies will inevitably control the price and supply of engine components by virtue of their market power. Other shipbuilders that do not have the ability to manufacture engines will only be able to obtain relevant parts from HD KSOE and Hanwha Group.
During the merger review, the KFTC considers the opinions of stakeholders and decides whether to approve the merger. Depending on the degree of restriction of competition, the KFTC may make a conditional approval decision.
Earlier this year, the KFTC approved Hanwha Group’s acquisition of HSD Engine, which has changed its name to Hanwha Engine. Hanwha’s acquisition is unlikely to constitute a monopoly.
The move is said to help Hanwha Group secure “total shipbuilding solutions” from engine manufacturing to shipbuilding by utilizing its own production and technology, and is expected to expand its after-sales service business including sales and maintenance of marine auxiliary equipment, thus completing vertical integration, reducing costs and improving the competitiveness of components.
