The European Commission has prohibited, under the EU Merger Regulation, the acquisition of Daewoo Shipbuilding & Marine Engineering CO., Ltd (DSME) by Hyundai Heavy Industries Holdings (HHIH).
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 liquefied gas carriers, the EU Commission affirmed, adding: the parties did not formally offer remedies to address the Commission’s concerns.
It was only the 10th merger that the European Union has blocked in the past decade among 3,000 requests for approval.
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.”
Both companies are global leaders in the construction of large LNG carriers, and two of the three largest players in this very concentrated market.
Large LNG carriers are an essential element in the supply chain of LNG. They are highly sophisticated vessels that can carry large quantities of LNG (145 000m3 and above) at a temperature of minus 162 degrees Celsius. Over the past five years, the worldwide market for the construction of large LNG carriers represented up to €40 billion, with European customers accounting for almost 50% of all orders.(Dreamstime photo of Daewoo Shipbuilding)