Hyundai Heavy LNG Shipping Deal With Daewoo Vetoed by EU
(Bloomberg) -- Hyundai Heavy Industries Co.’s bid for Daewoo Shipbuilding & Marine Engineering Co. was vetoed by the European Union over fears it would create an overly powerful producer of liquefied natural gas carriers.
The combined firm “would have been by far the largest player in the world,” facing rivalry only from Samsung Heavy Industries Co., the European Commission said in a statement on Thursday.
“The merger would have led to fewer suppliers and higher prices for large vessels transporting LNG,” Margrethe Vestager, the EU’s antitrust chief, said in the statement. LNG vessels are “essential” to supply the energy source which is important for the region’s energy security, she said.
Shipyards from South Korea to China to Singapore are looking to merge as orders for new vessels and offshore oil rigs have slowed for years due to excess capacity. Hyundai Heavy agreed in 2019 to combine with Daewoo Shipbuilding & Marine Engineering to defend their industry lead from an increasingly ambitious China
Hyundai Heavy said in an emailed statement that it’s “disappointing” that the EU rejected the merger, despite unconditional approvals from Singapore and China. It will weigh a potential court appeal, it said.
Deal vetoes are rare and the EU hasn’t blocked a deal in more than two years after it stopped Thyssenkrupp AG’s bid for Tata Steel Ltd. It sparked a political row with France and Germany for thwarting Siemens AG and Alstom SA’s project to create a European rail giant.
“The Korean government still believes it’s in the best interest of Daewoo to find an owner and Korea Development Bank will lead efforts to come up with a plan soon to help strengthen the shipbuilder’s competitiveness,” Korea Development Bank, Daewoo’s biggest shareholder, said in an emailed statement.
The companies made no concessions to allay EU concerns, leaving her no choice but to block the deal, Vestager told reporters at a Brussels press briefing.
The coronavirus pandemic didn’t affect demand for large LNG carriers, the EU said, and the future demand outlook for the ships is “very positive.”
The plan to combine two Korean shipbuilding giants followed China’s move to merge its two biggest shipbuilders into a national champion that could give China more commercial and political influence over the Asia-Pacific region. China has long sought to create national champions with unprecedented scale, and has engineered similar mergers in the train-making and container-shipping industries.
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