The EU on Thursday blocked the merger of two South Korean ship-making giants over concerns the deal would restrict the supply of large liquefied gas carriers, posing a threat to Europe's energy security.

The takeover of Daewoo Shipbuilding & Marine Engineering by rival Hyundai Heavy Industries Holdings, the European Commission said, "would have created a dominant position by the new merged company and reduced competition in the worldwide market for LNG carriers".

The veto of the tie up comes two years after Brussels stopped India's Tata Steel and Germany's Thyssenkrupp from merging, and three years after it blocked the merger of the train-making businesses of Siemens and Alstom, angering France and Germany.

"Given the evidence of negative effects of the merger (and) the absence of remedies, the Commission decided to block the merger," said EU competition chief Margrethe Vestager at a news briefing.

South Korean shipbuilders
The EU worried the merger of the shipbuilding activities of Daewoo and Hyundai would have caused too much concentration in the building of ships to carry liquefied natural gas Photo: AFP / ED JONES

The EU found that the merged entities would create a group controlling nearly two-thirds of the global LNG cargo ship market and would have grown more dominant over time.

The merger comes when energy prices are soaring in Europe and as the bloc tries to pivot away from its dependence on Russian natural gas towards other sources, including LNG.

"European customers would be left with few alternatives to the merged entity, only a handful of competitors would remain in the market," Vestager warned.

"It does not matter where the merging firms are located. What matters is whether they compete for demand in Europe," she said.

The merger of the two of the largest shipyards in the world had been notified to the EU in November 2019, which had opened an in-depth investigation the following month.

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