Summary of transaction:
- the names of the merger parties;
The merger parties are the following entities within the Hanwha Group:
- Hanwha Aerospace Co., Ltd.;
- Hanwha Systems Co., Ltd.;
- Hanwha Convergence Co., Ltd;
- Hanwha Impact Partners Inc.; and
- Hanwha Energy Corporation Singapore Pte. Ltd. (“HECS”);
and Daewoo Shipbuilding & Marine Engineering Co. (“DSME”) (collectively, the “Parties”).
- a description of the transaction;
This notification concerns the anticipated acquisition by various Hanwha Group companies of 104,438,643 shares of common stock to be issued by DSME through allocation to Hanwha Group entities pursuant to a share subscription agreement (the “Proposed Transaction”). As a result of the Proposed Transaction, the Hanwha Group will acquire: 49.3% of the issued and outstanding shares of DSME, making Hanwha Group the largest shareholder; and the right to appoint 50% or more of the board of directors of DSME, thus acquiring decisive influence over DSME.
- a description of the business activities of the merger parties worldwide and in Singapore;
As a conglomerate, the business areas of the Hanwha Group are varied. They generally cover gunpowder manufacturing, wholesale and retail, chemical manufacturing, construction, leisure/service, solar photovoltaic generation, and finance. More information on the Hanwha Group is available at www.hanwha.com.
The Hanwha Group’s business operations in Singapore (whether through Singapore-registered entities or otherwise) is divided into four business groups, namely: (1) Hanwha Corp, which provides products such as naphtha, ethylene, and other petrochemical products; (2) Solutions, which provides chemicals and solar modules; (3) HECS, which provides trade brokerage for petrochemical products, bituminous coal, coal, feedstock, oil etc.; and (4) Financial Services, which provides investment services such as outsourcing, advisory services, fund management, and brokerage.
DSME specialises in shipbuilding and other maritime businesses. It builds various types of ships such as LNG carriers, oil tankers, container ships, and LPG carriers; offshore facilities such as floating production storage and offloading facilities, fixed platforms, floating production units, crude oil rigs and drill ships; and special vessels such as submarines, destroyers, salvage ships, and patrol ships. DSME’s subsidiaries produce ship blocks and parts, provide computer systems integration service and comprehensive advice on computer systems, and support onshore plant construction. More information on DSME is available at https://www.dsme.co.kr/epub/main/index.do.
DSME’s business in Singapore in 2021 consisted of the building of ships ordered by Singapore shipowners, such as LNG carriers and very large crude carriers.
- a description of the overlapping goods or services, including brand names;
The Parties do not horizontally overlap in any market in Singapore.
- the applicant’s views on:
- the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The Proposed Transaction is likely to result in possible pro-competitive vertical integration in the following markets:
- vertical integration in the global supply of military naval vessels: As the Hanwha Group is engaged in manufacturing and supplying munitions and weapon systems mounted on surface vessels and submarines built by DSME, the Proposed Transaction is expected to create a vertical relationship in the global supply of military naval vessels;
- vertical integration in the global supply of LNG carriers: As the Hanwha Group is engaged in manufacturing and supplying compressors (which are used as components in LNG carriers) and DMSE is engaged in the building of LNG carriers (among other types of vessels), the Proposed Transaction is expected to create a vertical relationship in the global supply of LNG carriers; and
- vertical integration in the global supply of production and storage facilities for offshore plants: As the Hanwha Group is engaged in manufacturing and supplying compressors required for production and storage facilities to manufacturers that build offshore plant facilities, and DSME manufactures and sells production and storage facilities for offshore plants (as well as for facilities related to drilling, installation, and services), the Proposed Transaction is likely to create a vertical relationship in the supply of production and storage facilities for offshore plants.
The Proposed Transaction is not likely to result in vertical foreclosure concerns in any of the above markets in Singapore because:
- outside of Korea, Hanwha Group’s global market share in the upstream munitions and weapon systems market is negligible as the Hanwha Group rarely engages in the direct export of munitions and weapon systems; and
- Hanwha Group’s global market shares in the upstream air compressor and gas compressor markets are very small.