The European Commission has blocked the proposed takeover of Daewoo Shipbuilding & Marine Engineering (DSME) by Hyundai Heavy Industries Holdings (HHIH).
The Commission found the merger between the two South Korean shipbuilders would create a dominant position by the new merged company and reduce competition in the global market for the construction of large liquefied natural gas (LNG) carriers.
The decision follows an in-depth investigation into the proposed merger, with feedback from customers, competitors and third parties suggesting the deal would reduce competition and increase prices for the vessels.
DSME and HHIH are global leaders in the construction of large LNG carriers and two of the three largest players in this market.
According to the Commission, large LNG carriers are an essential element in the LNG supply chain and are able to carry large quantities of LNG – 145,000m3 and above – at a temperature of minus 162°C.
The worldwide market for the construction of large LNG carriers represented up to €40 billion (`£33.bn) over the last five years, with European customers accounting for almost 50% of all orders.
Executive Vice President Margrethe Vestager, in charge of competition policy said: “Large LNG vessels are an essential element in the supply chain of liquefied natural gas (LNG) and enable the transport of this source of energy around the globe. LNG contributes to the diversification of Europe’s source of energy and therefore improves energy security.
“The merger between HHIH and DSME would have led to a dominant position in the global market for the construction of large LNG vessels, for which there is significant demand from European carriers. Given that no remedies were submitted, the merger would have led to fewer suppliers and higher prices for large vessels transporting LNG. This is why we prohibited the merger.”