The European Commission has vetoed Hyundai Heavy Industries' (HHI's) proposed acquisition of rival South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME).
The decision blocks a deal – originally proposed in early 2019 – that would have created one of Asia's biggest naval shipbuilders with estimated defence revenues of more than USD2 billion a year.
The European Commission said on 13 January that its decision was based on fears that the takeover would create a monopoly in the liquefied natural gas (LNG) carrier market.
The two companies, as well as being major naval shipyards, are also two of the world's largest constructors of LNG tankers. The European Commission said the proposed deal would provide the merged company with at least 60% of the global LNG market.
“The European Commission has prohibited, under EU Merger Regulation, the acquisition of DSME by Hyundai Heavy Industries Holdings (HHIH),” said the commission using the name of HHI's holding company.
“The merger between the two South Korean shipbuilders would have created a dominant position by the new merged company and reduced competition in the worldwide market for the construction of large LNG carriers.”
Margrethe Vestager, the Commission's Executive Vice-President in charge of competition policy, said, “The merger would have led to fewer suppliers and higher prices for large vessels transporting LNG. This is why we prohibited the merger.”
The European Commission said that HHI did not “formally offer remedies” to address its concerns about the deal.
In a response, HHIH said the commission's decision was unreasonable and disappointing. It said the decision, based on the estimated combined share of the LNG market was “not a proper indicator of market power in the shipbuilding industry”.
Looking to read the full article?
Gain unlimited access to Janes news and more...
