By Foo Yun Chee

BRUSSELS (Reuters) – Hyundai Heavy Industries’ proposed takeover of rival Daewoo Shipbuilding & Marine Engineering Co Ltd to create the world’s biggest shipbuilder was hit with an EU veto on Thursday on concerns that the deal would hurt competition.

Hyundai, one of world’s largest shipbuilders, announced this deal in 2019 partly to address overcapacity within the sector.

The EU Antitrust Office approved the vesselyard’s takeover of the company in November 2019 and the shipyard criticised its focus on market shares.

South Korea’s industry ministry expressed regret at the EU decision to reject a deal that was already signed by China, Singapore, and Kazakhstan.

The European Commission stated that the merger would result in the creation of the largest shipbuilder worldwide with a market share at least 60%. This leaves few other suppliers available for customers.

EU Competition Enforcement Officer stated that the EU tie-up would decrease competition in global markets for construction of large LNG carriers.

They also stated that the companies had not made a formal offer to resolve competition concerns. According to the report, the COVID-19 epidemic did not impact the market for large LNG carriers. However, the outlook for future LNG demand is positive.

Reuters reported Dec. 10, that the EU executive would block the agreement.

“Given the lack of remedies, the merger would have lead to lower suppliers and increased prices for large LNG vessels. Margrethe Vestager (EU antitrust chief) stated in a statement that this is the reason we have stopped the merger.

It is the Commission’s first merger veto since blocking Thyssenkrupp. (DE) Tata Steel’s plans to create a major joint venture in 2019 on concerns about the potential for increased prices.