The European Union on Thursday vetoed the merger of two South Korean shipbuilding giants over concerns the deal would restrict the supply of large liquefied natural gas (LNG) carriers, posing a threat to Europe’s energy security.
The rejection by a huge market for the South Korean shipyards came as energy prices remain high and the EU is scrambling to diversify its fossil fuel supply away from Russia and to greener alternatives than coal.
The takeover of Daewoo Shipbuilding & Marine Engineering by rival Hyundai Heavy Industries (HHI), the European Commission said, “would have created a dominant position by the new merged company and reduced competition in the worldwide market for LNG carriers”.
The veto comes two years after Brussels stopped India’s Tata Steel and Germany’s Thyssenkrupp from merging, and three years after it blocked the merger of the train-making businesses of Siemens and Alstom, angering France and Germany.
Power to Reject
The EU has the power to vet and reject mergers of any companies, even non-European, that have a decisive impact on its market of 450 million people.
“Given the evidence of negative effects of the merger and the absence of remedies, the Commission decided to block the merger,” EU competition chief Margrethe Vestager said.
The EU found that the merged entities would create a group controlling nearly two-thirds of the global market of LNG cargo ships that carry super-chilled liquid gas.
Hyundai called the commission’s conclusion unreasonable and disappointing, South Korean news agency Yonhap reported.
The shipbuilder pointed out that the commission had only taken issue with the LNG vessel market and that it reserved the right to fight the veto in EU court.
“The Commission’s use of the market share as evaluation criteria has no probative value as the market share itself is not a proper indicator of market power in the shipbuilding industry,” HHI said in a statement.
LNG ships are the only sector that the EU took issue with in terms of dominant position, HHI said.
- Reuters with additional editing by George Russell