Hyundai Heavy Industries Holdings’ $1.8 billion merger with competitor Daewoo could inflate costs, EU antitrust regulators cautioned on Tuesday as they started a full-scale investigation.
Hyundai is looking forward to reinforce its position as the world’s biggest shipbuilder partly in response to overcapacity in the industry. The merged company would be having a 21% market share.
The European Commission stated it had serious issues about the deal, confirming a Reuters story on December 9.
“Cargo shipbuilding is an important industry for the European Union,” stated Margrethe Vestager, vice president of the European Commission.
Much of the EU’s internal and extend freight trade took place through sea and European shipping companies frequently bought vessels from Hyundai and Daewoo.
“This is why we will carefully assess whether the proposed transaction would negatively impact competition in the construction of cargo ships, to the detriment of European consumers,” Vestager stated.
The Commission will make a decision by May 7 whether to clear or block the deal. The shipbuilders will probably need to offer concessions to address the issues.
It stated its concerns centered on the markets for big container ships and carriers of oil, liquefied natural gas, and liquefied petroleum gas, markets with high barriers to entry where rivalry could be decreased.
However, to avert regulatory worries, the shipyards have already stated they will rival independently after merging, with each company able to negotiate their own contracts with clients and providers.
They also want the EU to take into account the competitive threat from the merged China Shipbuilding Industry Corp (CSIC) and China State Shipbuilding, other sources stated earlier, an entity with sales more than three times it’s own.
Competition regulators in South Korea, Singapore, China, and Japan are also evaluating the deal, that has been approved in Kazakhstan. Singapore earlier this month voiced its issues.
State-funded Korea Development Bank (KDB) currently holds 55.7 percent of Daewoo.