Friday 1/21/22
INDUSTRY

EU regulator blocks merger of two South Korean shipbuilders

"The merger of HHIH and DSME would have created a dominant position in the world market for the construction of large liquefied natural gas carriers, on which European transport companies rely," the EU Commissioner responsible, Margrethe Vestager, announced on Thursday

13 January 2022, Belgium, Brussels: EU Commissioner responsible for a Europe fit for the Digital Age Margrethe Vestager speaks during a press conference at the European Commission headquarters. The EU's competition regulator blocked the takeover of the South Korean shipbuilder Daewoo (DSME) by its competitor Hyundai Heavy Industries (HHIH). Photo: Valeria Mongelli/ZUMA Press Wire/dpa
The EU Commissioner responsible for a Europe fit for the Digital Age Margrethe Vestager. Photo: Valeria Mongelli/dpa.

The EU's competition regulator blocked the takeover of the South Korean shipbuilder Daewoo (DSME) by its competitor Hyundai Heavy Industries (HHIH), also from South Korea, on Thursday.

"The merger of HHIH and DSME would have created a dominant position in the world market for the construction of large liquefied natural gas carriers, on which European transport companies rely," the EU Commissioner responsible, Margrethe Vestager, announced on Thursday.

HHIH expressed its disappointment at the decision and criticized the commission for focusing on market share. Market share alone is not the appropriate indicator of market power in the shipbuilding industry, HHIH said in a statement, according to South Korean national news agency Yonhap. The holding company was considering taking action against the ban, it said.

The proposed acquisition has been on the cards since 2019. However, due to its potential impact on the global market, approval is needed not only from the South Korean government but also from competition authorities in the EU and elsewhere.

The merger was likely to lead to higher prices and less competition in the market for large liquefied natural gas (LNG) carriers, Vestager said, noting that the companies had failed to suggest solutions for various of the regulator's concerns. "That is why we have prohibited the merger," she concluded.

Impact on energy consumers

The merger could ultimately also lead to higher prices for energy consumers, a commission statement said.

The companies are two of the three largest global players in the market for building large liquefied natural gas (LNG) carriers. In 2019, the commission voiced concerns about the acquisition, in relation to the construction of oil tankers, liquefied petroleum gas tankers, container ships as well as small LNG carriers. Thursday's decision relates only to the market for large LNG carriers, however.

According to Vestager, this is only the 10th time the authority has blocked a merger in the past decade.

Comments