Hyundai Wins Conditional Approval for Engine Manufacturer Acquisition
South Korean regulators expressed concern that HD Hyundai might be in a position to monopolize the market and hinger supplies to competitors if it is permitted to acquire a controlling stake in marine engine manufacturer STX Heavy Industries. They however decided to provisionally permit the deal to proceed with stipulations to ensure the supply of parts to competitors for a minimum of three years.
The Korea Fair Trade Commission expressed concerns that HD Hyundai could monopolize and prevent or delay the supply of crankshafts especially to Hanwha Ocean. They noted that if the investment was permitted to proceed, HD Hyundai would control as much as 70 percent of the vessel engine market and 80 percent of the domestic engine component sector. One concern was over the supply of crankshafts to Hanwha Engine, which currently gets 80 percent of production from Doosan and the remainder from KM Crankshaft. Hyundai is the third manufacturer of crankshafts in Korea.
The conditional approval would require STX Heavy to maintain a guaranteed minimum supply for three years. They would also not be able to refuse supply requests and be limited in the ability to raise prices for the key components. The trade commission said it would be for a minimum of three years and the restrictions could be extended if required.
HD Hyundai won a competition staged by private equity firm Pinetree Partners, which had acquired STX Heavy in 2018 after the collapse of STX Group. The shipbuilder would acquire 6.5 million shares and also acquire 5.36 million newly issued shares of the company for a total value of approximately $65 million. HD Hyundai would become the largest shareholder with a position equal to approximately 35 percent of the company.
The deal was promoted last year as a way of recapitalizing and strengthening STX Heavy Industries, Hyundai cited the ability to expand its large engine production capabilities and strengthen its position in the market.
Hanwha Group was another bidder for the company and after losing out acquired HSD Engine in 2024. The company was rebranded as Hanwha Engine and is reported to have approximately 20 percent of the domestic engine market. The concern of the FTC is that HD Hyundai could disrupt manufacturing at Hanwha Engine if it does to deliver the components or increase prices.
In addition to supplying engine components for Hanwha Ocean’s constructions, Hanwha Engine also sells products to Samsung Heavy Industries and Shanghai Waigoqiao Shipbuilding in China.
Analysts are speculating that after the transaction closes competition will further increase between HD Hyundai and Hanwa Ocean. Both companies look to expand this shipbuilding by focusing on new technologies including new generations of engines for ammonia and other emerging fuel sources.