EU Investigation: Hyundai Faces Probe After Merger With Rival Daewoo

South Korea-based Hyundai Heavy Industries Holdings Co Ltd., the world's largest shipbuilding company, faces an EU antitrust probe after the company bought its industry rival Daewoo Shipbuilding & Marine Engineering Co Ltd., sources told Reuters. The $1.8 billion deal was announced in January, allowing for the merged company to control over 20% of the global market.

The European Commission will likely launch the investigation into the merger next week and could result in Hyundai selling some of its assets.

The world shipbuilding sector has faced troubles in recent years, with Daewoo receiving a $2.6 billion bailout from South Korean banks in 2017. The Korea Development Bank (KDB) owns 55.7% of Daewoo.

The merger will "raise the fundamental competitiveness of Daewoo, at a time when the threat from latecomers in China and Singapore is growing," KDB Chairman Lee Don-gull said in January. Hyundai hopes EU antitrust regulators will understand the competitive threat Korean shipbuilding companies face from rival Chinese shipbuilding firms.

Hyundai is also trying to clear the deal with regulators from South Korea, Japan, Singapore and China. Kazakh regulators have approved the merger.

Transport companies are looking to buy more advanced ships, such as LNG carriers, to replace their aging fleets, creating a boon for the shipbuilding industry. Shipowners will also need cleaner fuel due to marine pollution laws, also causing demand for more advanced models.