EU rejects merger of Skorean shipbuilders

BRUSSELS — The European Union on Thursday rejected the merger between South Korean shipbuilders Hyundai and Daewoo, saying a union between two of the world’s biggest players in the industry would have given the combined company a global stranglehold on the production of liquefied natural gas carriers.

EU Competition Commissioner Margrethe Vestager said the merger “would have led to less choice, higher prices and ultimately less innovation” for European customers, which account for nearly half the orders in the $45 billion market.

“We prohibited the merger,” Vestager said, arguing the new company would have eliminated a major player and grabbed a global market share exceeding 60%.

And it is not an easy market for new players to jump into. LNG shipbuilding is a complicated process that requires transporting frozen gas at minus 260 degrees Fahrenheit across the globe.

“Only a handful of shipbuilders around the world are able to build these vessels,” she said.

Hyundai Heavy Industries Holdings called the decision disappointing, saying it “will pursue possible measures, including an appeal to the General Court of the European Union.” It denied that the new company would have a chokehold on the market, saying “credible competitors already exist,” including Samsung in South Korea and Mitsubishi and Kawasaki in Japan.

While Vestager’s office is powerful in vetting such mergers and ensuring European consumers are not hurt by dominant players in the market, it was only the 10th merger that it has blocked in the past decade among 3,000 requests for approval.

Under EU rules, the European Commission can reject mergers even outside its borders if the companies do business within the 27-nation bloc. In the case of the LNG carriers, the new company would have a massive stake in the European markets. To move forward, the two companies would put themselves outside of EU law and lose a huge part of their market.