The solution is that you import hdkey from the ethereum-wallet library. hdkey is being exported and it is not the default export. 

    const {hdkey} = require('ethereumjs-wallet');
  
    const mnemonic = bip39.generateMnemonic();
    const seed = bip39.mnemonicToSeedSync(mnemonic);
    const hdWallet = hdkey.fromMasterSeed(seed);