By Kang Yoon-seung
SEOUL, April 27 (Yonhap) — South Korea’s antitrust regulator said Thursday it has decided to give the nod to Hanwha Group’s plan to acquire Daewoo Shipbuilding & Marine Engineering Co. (DSME) under the condition the conglomerate does not discriminate against other rivals in the market.
The decision came about four months after Hanwha clinched a formal agreement, under which Hanwha Aerospace and other affiliates will acquire a 49.3 percent stake and managerial control in DSME through a 2-trillion won (US$1.49 billion) rights offering.
The Fair Trade Commission (FTC) was looking into the case over concerns that the acquisition may impede competition in the South Korean military vessel market. Hanwha is the top or the sole supplier for roughly 10 crucial components utilized in military ships, such as radar and navigation systems.
“We have conducted a comprehensive review of the proposed deal, which involves a vertical merger between companies that hold significant dominance in both the market for vessels and their parts, as there is a risk that the merger could impede competition,” the FTC said in a statement.
To address these concerns, the regulator has instructed Hanwha and DSME to comply with three rules, one of which includes banning the supply of vessel parts at discriminatory prices.
The two companies also cannot unfairly refuse to provide technical information regarding equipment to rival companies when they request it via the Defense Acquisition Program Administration.
The FTC restricted Hanwha and DSME from providing trade secrets acquired from competitors to affiliated companies as well.
Hanwha and DSME are required to comply with these orders for the next three years and submit progress reports every six months. If market conditions or regulations change, the watchdog may extend the order beyond the initial period.
“Although the government is the sole buyer in the sector, it is significant that we have applied the necessary measures to avoid limited competition in the bidding process,” the FTC said.
The acquisition procedures are expected to be completed next month. Regulators of the European Union, Britain, Japan and China also earlier approved the deal.
When completed, Hanwha Group becomes the top shareholder of DSME, followed by the state-run Korea Development Bank with 28.2 percent.
This decision clears the path for Hanwha to establish itself as a comprehensive defense firm, with capabilities spanning land, sea and air domains.
DSME, meanwhile, stands as the No. 1 player in the country’s submarine market, taking up 97.8 percent of the orders in the past five years. It also took up 25.4 percent of military vessel orders over the period.
Hanwha was founded in 1952 as an explosives maker and has since diversified its business, which now ranges from chemicals, energy and defense to retail and finance.
colin@yna.co.kr
(YONHAP NEWS)