Gas, that’s why Brussels stops the merger between shipbuilders Daewoo and Hyundai
The European antitrust has banned the merger between the Daewoo-Hyundai shipyards. The two South Korean companies are important ship suppliers to the EU and the transaction would have impacted competition in the market
The European Commission has banned the merger of two major South Korean shipbuilders, Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries Holdings.
The transaction, valued at approximately $ 2 billion, would have created a dominant position on the part of the resulting new company and reduced competition in the global market for the construction of large liquefied natural gas ( LNG ) ships.
As the FT points out, Brussels is concerned about the dominance of the LNG carrier market due to the surge in energy prices in Europe. The two sides have not formally offered remedies to address the concerns of the European Commission.
This is the first decision to block a merger since the European Antitrust blocked the Tata Steel / Thyssenkrupp joint venture in 2019, Reuters recalls.
Following the decision of the European Antitrust, Hyundai declared that the EU veto is "unreasonable and disappointing". Therefore, the manufacturer has announced the appeal to the EU Court.
The merger received approval from regulators in Singapore, China and Kazakhstan. However, the deal needs the green light from the EU, Japan and South Korea to complete the deal.
All the details.
THE EU ANTITRUST DECISION
European commission vetoed proposed merger between Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries Holdings
The merger between the two companies “would have led to a dominant position in the world market for the construction of large LNG ships, for which there is a strong demand from European carriers. As no remedies were presented, the merger would have resulted in fewer suppliers and higher prices for large LNG-carrying vessels. This is why we have banned the merger ”, highlighted the Vice President of the European Commission, Margrethe Vestager, responsible for Competition.
THE INVESTIGATION OF THE HYUNDAI-DAEWOO OPERATION
Today's decision follows an in-depth investigation by the EU Antitrust into the operation proposed by the two South Korean manufacturers.
Hyundai, one of the largest shipbuilders in the world, had announced the deal in 2019 in part to address overcapacity in the industry.
RISK OF DOMINANT POSITION ON THE MARKET
The veto of the EU antitrust is based on the consideration that the parties have already very large and growing market shares. The resulting new company "would have been by far the largest player in the world, in an already concentrated market," with a combined market share of at least 60%, leaving few alternative suppliers for customers.
Furthermore, according to Brussels, there are already very few alternatives for customers, with only one major competitor in the market other than the two parties.
The Antitrust Authority then found very high barriers to entry into the market and assessed the impact of the coronavirus pandemic on the sector, finding that the demand for large LNG carriers was not affected by the pandemic and that the prospects for future demand are very positive.
ON THE BACKGROUND OF THE SOURCE IN ENERGY PRICES
Finally, the context of energy prices also weighs on the Brussels decision.
Energy prices have soared in Europe this winter, with LNG transportation costs in Asia soaring to record highs of more than $ 300,000 per day due to rising global demand, highlights the Ft . And the two two South Korean companies dominate the market for the production of LNG-carrying vessels.
“Large LNG vessels are an essential element in the supply chain of liquefied natural gas and allow the transport of this energy source around the world. LNG contributes to the diversification of the European energy source and therefore improves energy security ”, Vestager stressed.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/bruxelles-stoppa-la-fusione-tra-i-costruttori-navali-daewoo-hyundai/ on Thu, 13 Jan 2022 15:35:05 +0000.