A bid by Fincantieri to take over French rival Chantiers de l’Atlantique has collapsed.
The state-controlled shipbuilders have abandoned plans to merge, blaming the pandemic and pressure from European competition regulators.
A joint communique issued by the Italian and French governments said the “unprecedented uncertainty in the tourist market does not allow the planned transaction to proceed”.
The decision brings the curtain down on three years of negotiations designed to create a European shipbuilding leviathan.
Fincantieri and Chantiers have been involved in merger talks since February 2018.
The Italian shipbuilder had planned to purchase 50% of the shares in the French yard.
But the plan got bogged down by competition concerns and the deal came under the scrutiny of the European Commission, which opened an investigation into the merger in October 2019.
The shipbuilders have been unable to provide satisfactory answers to questions posed by the competition watchdog.
“[Because of] the Covid-19 epidemic and the relative consequence of the recovery of the shipbuilding market, the commission hasn’t reached a final position on the transaction,” the communique read.
The potentially dominant position that a merged company would have commanded in cruiseship construction has long been a concern for competition authorities in Brussels.
Their combined orderbook suggests that the two yards could together command more than half of the cruiseship newbuilding market.
Recent estimates suggest that Fincantieri holds around 37% of cruiseships on order on a gross tonnage basis, while Saint-Nazaire-based Chantiers has 21%.
Questions over direction
The other large cruise shipbuilder is Germany’s Meyer Werft. Including its Turku yard in Finland, the group has a 28% share of the world's cruise shipbuilding market.
The shattering of merger hopes raises questions over the future direction of the Italian and French yards.
Their immediate focus will be on exiting the current crisis and engaging in new projects, the communique said.
The French state will remain the main shareholder in Chantiers “and will support the company through the crisis”.
The two countries have also pledged to work together on projects in the naval side of shipbuilding and “reaffirm the strength of their economic cooperation, particularly in the industrial sector”.
The merger was first proposed following the financial problems of Chantiers' former owner, South Korea's STX Offshore & Shipbuilding.
The decision to abandon the project comes at a time when the cruise industry has been hard hit by the Covid-19 pandemic.
Fincantieri has agreed with clients a postponement of some cruiseship deliveries as a result of the outbreak to avoid cancelling previously acquired orders.
To weather the difficulties, it also borrowed €1.15bn ($1.39bn) from a group of banks tapping a guarantee provided by the state as part of emergency measures against the pandemic.
