In July last year, HD Hyundai Heavy Industries signed the main contract to acquire STX Heavy Industries in collaboration with private equity fund manager Pine Tree Partners. Since then, HD Hyundai Heavy Industries has been eagerly awaiting the Fair Trade Commission’s  corporate merger review results after securing a 35% stake in STX Heavy Industries.

According to industry sources on July 12, the FTC’s decision on HD Hyundai Heavy Industries’ acquisition of STX Heavy Industries, a mid-tier holding company of the HD Hyundai Group, is expected to be announced as early as this month. The industry predicts that the FTC will not disapprove the corporate merger, although there is speculation that the conclusion may come in the form of conditional approval.

Should HD Hyundai Heavy Industries acquire STX Heavy Industries, competition between HD Hyundai and Hanwha in the engine market is expected to intensify. Both HD Hyundai Group and Hanwha Group are anticipated to fiercely compete in the dual-fuel engine market, which is gaining attention ahead of fully zero-carbon ship engines. These engines start with diesel fuel and then switch to natural gas for operation, offering a more environmentally friendly alternative.

HD Hyundai Heavy Industries currently holds the top position in the medium-speed engine sector for ship generators, with about a 35% market share. If combined with STX Heavy Industries, which is known to be in third place, the market share is expected to rise to around 40%. HD Hyundai anticipates synergy effects such as increased production capacity and absorption of sales networks if it acquires STX Heavy Industries. STX Heavy Industries counts Xiamen Xiangyu Group in China and MAN Energy Solutions, the world’s number one ship engine company, among its major revenue sources.

Industry sources have stated, “The Fair Trade Commission’s decision on HD Hyundai Heavy Industries’ acquisition of STX Heavy Industries, a mid-tier holding company of the HD Hyundai Group, is expected to be announced as early as this month.” Another industry insider commented, “The Fair Trade Commission will not disapprove the corporate merger,” while also noting, “The conclusion may come in the form of conditional approval.”

The potential merger is set against a backdrop of significant market dynamics and competition. HD Hyundai Heavy Industries, one of the largest shipbuilding companies in the world, is known for its leadership in the medium-speed engine sector for ship generators. On the other hand, STX Heavy Industries has a notable presence in the engine manufacturing sector, particularly in the shipbuilding industry.

The role of the FTC is crucial in this context, as it oversees corporate mergers and acquisitions to ensure fair competition in the market. The involvement of Pine Tree Partners, a private equity fund manager, in facilitating the initial acquisition agreement indicates strategic financial investments aimed at restructuring or enhancing company value.

The competitive landscape, especially in the dual-fuel engine market, is essential for understanding the potential impact of the merger. Hanwha Group, another major player in the engine market, will be a direct competitor to the newly merged entity. The shift towards more environmentally friendly technologies in the maritime industry, including the development and adoption of dual-fuel and zero-carbon engines, is a critical trend driving competition and innovation.

Source: Business Korea