Regulator gives conditional nod to HD KSOE, STX Heavy merger

[Photo by Yonhap]

South Korea’s antitrust regulator gave a conditional approval to HD Korea Shipbuilding & Offshore Engineering Co. (HD KSOE)’s acquisition of STX Heavy Industries Co.

The merger of HD KSOE, the leader in the marine engine and components market, with STX Heavy, the third-largest player in the same sector, is expected to intensify competition in the Korean shipbuilding industry. Hanwha Group also succeeded in vertical integration by acquiring HSD Engine Co. in February 2024.

The Korea Fair Trade Commission (KFTC) announced on Monday that it conditionally approved HD KSOE’s acquisition of 35.05 percent of STX Heavy’s shares. The approval conditions include banning the refusal to supply crankshafts, a key engine component for vessels, to competitors in ship engine manufacturing as well as ensuring the minimum volume of supply, limiting the increase in prices, and prohibiting delays in delivery, which will be in effect for three years.

The KFTC explained that these conditions were imposed due to concerns about potential restrictions on competition in the Korea ship engine market. Without these conditions, there is a possibility that STX Heavy could stop supplying key components to Hanwha Engine Co., its current client.

HD KSOE, an intermediate holding company for shipbuilding within HD Hyundai Group, and Hanwha Engine are competitors in the engine market, and Hanwha Engine has no alternative suppliers for these key components other than STX Heavy.

“We considered the cyclical nature of the shipbuilding industry and Hanwha Engine’s strategy to continue producing key components in-house,” a senior KFTC official said. “If HD KSOE unfairly refuses supply even after the corrective measures end in three years, we can apply the antitrust law.”