Japan’s biggest shipbuilders team up to rival mega mergers

Dhaka Post Desk

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5 December, 2021 42 Views


The top two Japanese shipbuilders, Imabari Shipbuilding and Japan Marine United, are forming an alliance to navigate a global industry in flux amid blockbuster mergers in South Korea and China.

The two unlisted companies will enter into a capital tie-up, according to Friday’s announcement. They are negotiating a deal where Imabari, the larger of the two, will take a nearly 30% stake in JMU by purchasing new shares. A final agreement is due by fiscal year-end.

The alliance would control about 10% of the global shipbuilding business — only half as much as the behemoth formed by this month’s merger of China State Shipbuilding Corp. anChina Shipbuilding Industry.

Meanwhile, South Korea’s Hyundai Heavy Industries is finalizing its merger with domestic peer Daewoo Shipbuilding & Marine Engineering. The new company would also command a roughly 20% global share.

Chinese and South Korean shipbuilders have attained dominance through heavy capital spending and price competition on orders. The Japanese shipbuilding industry has been squeezed by the rivalry but still has more than 10 players.

JMU was itself formed by a 2013 merger of JFE Holdings‘ and IHI‘s shipbuilding operations. The company has run into financial trouble of late. Sales shrank 11% to 254.1 billion yen ($2.3 billion) in the year ended March. JMU recorded an April-September net loss of 6.5 billion yen.

JMU approached multiple domestic shipbuilders over the years about a partnership. There is sentiment in the industry that the capital tie-up with Imabari is a bailout of JMU in all but name.

Along with the capital tie-up, the Imabari and JMU will jointly establish a company to design and sell ships. They will collaborate on a variety of vessels, including cargo ships, tankers and vehicle carriers. Liquefied natural gas carriers will be left out of the equation.

Imabari’s 10 shipyards and JMU’s five shipyards together accounted for about 40% of Japan’s construction volume in 2018. Imabari’s network of affiliated companies makes the shipbuilder cost-competitive. JMU plans to incorporate Imabari’s expertise in cost controls to improve earnings.

This tie-up may encourage further realignment within the Japanese shipbuilding industry. Mitsui E&S Holdings has quietly reached out to Mitsubishi Heavy Industries about forming a partnership for making naval vessels.

Despite the drop in orders, the Japanese industry has yet to slash excess capacity. Imabari and JMU may consider shutting down shipyards to improve production efficiency.

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