CONTAINER-handling equipment companies Cargotec and Konecranes called off their planned merger after the UK Competition and Markets Authority (CMA) kyboshed the move on competition concerns.
The two Finnish companies had obtained clearances for the merger from several competition authorities, and the European Commission in February conditionally approved the planned merger.
The CMA said it had “substantial” competition concerns after its “in-depth” investigation into the US$5-billion deal.
The CMA said the merger would harm competition in the supply of a wide range of container-handling equipment products.
“Within these markets, the CMA’s investigation found that Cargotec and Konecranes are competing closely for business in the UK, and that UK customers would have few remaining alternative suppliers after the merger,” the authority said in a statement.
“While the merging businesses suggested that there would be an increased competitive threat from Chinese suppliers across all markets in future, the CMA found that this would not be sufficient to prevent the significant loss of competition that the merger of two key established suppliers would bring about.”
Completion of the merger remained subject to further approvals from various competition authorities, including the Department of Justice in the US.
Cargotec chairman Ilkka Herlin said the Cargotec board is convinced that the merger would have created substantial value for the entire industry as well as shareholders by improving sustainable material flow.
“The combination would have created a strong European company enabling accelerated shared abilities to innovate without harming competition. We have done all we could to realise the merger and are disappointed that our plans have had to be abandoned,” Mr Herlin said.
“After a long and extensive regulatory review process and merger planning preparations, it is time to shift our full focus on executing Cargotec’s own strategy and value-creation opportunities.”
Konecranes chairman Christoph Vitzthum said the combination of Konecranes and Cargotec would have created a company that would have been greater than the sum of its parts.
“The merger control process has been extensive and the investigations thorough, and Konecranes Board of Directors is disappointed that the remedy package offered did not satisfy the concerns of all regulators,” Mr Vitzthum said.
“At the same time, we believe that further remedies would have not been in the best interest of Konecranes’ shareholders as they would have changed the strategic rationale of the transaction. Konecranes will continue to drive its strategy and pursue value-creation potential on a stand-alone basis.”
Here in Australia, the potential merger drew the attention of the Australian Competition and Consumer Commission.
The ACCC had several competition concerns, including the reduction of straddle and shuttle carrier suppliers in Australia from two to one, and gantry cranes suppliers from three to two.
In February, the ACCC commenced public consultation on the proposed divestiture remedy in which both parties undertook to divest a range of assets globally to address the concerns of the ACCC and international competition regulators.
ACCC chair Gina Cass-Gottlieb said while the authority had not come to a final conclusion, Australian customers expressed strong concerns that the proposed divestiture remedy may not have been sufficient to address the competition issues the merger might cause.
“The identity of the prospective buyer for the divested Cargotec and Konecranes business units was not known, and it was unclear whether the prospective buyer would have the intention and ability to be an effective, long-term competitor to the merged firm,” Ms Cass-Gottlieb said.
“This is particularly important because container-handling equipment is a critical part of Australian supply chains, which are already under severe stress due to the COVID-19 pandemic. Any adverse impact on competition has the potential to cause significant damage to various parts of the Australian economy,” she said.
“It was also unclear that the proposed divestiture remedy, made up of mix and match assets from both companies, included all the critical assets, personnel and technology essential for the divested businesses to function successfully and compete with a combined Cargotec-Konecranes.”
