UK Joins Regulators Concerned Over Cargotec-Konecranes Merger
Cargotec and Konecranes, two of the leading providers of cargo handling equipment, are facing additional opposition to their proposed merger from the U.K.’s Competition and Markets Authority. The British regulator provisionally found the merger would significantly lessen competition in key parts of the market, following similar concerns raised by E.U. and Australian authorities.
The companies announced plans in October 2020 to combine to strengthen their competitive stance against Chinese crane manufacturers as well as unlock value in their operations by providing a lifecycle platform for customers and an increased focus on sustainability. The combined company would serve a broad range of customers including container handling, manufacturing, transportation, construction and engineering, paper and pulp, metals productions, mining, power, chemicals, and marine industries. In addition to shareholder approval, they require multiple anti-trust reviews. They originally targeted closing the merger in 2021, although it is now scheduled for the first half of 2022.
“We are currently concerned that this merger could lead to a reduced quality of service or higher prices for port terminals and other customers of container handling equipment,” said Martin Coleman, Chair of the CMA inquiry group reporting on the provisional findings of their investigation. “Our competition concerns need to be addressed to ensure that these customers are not worse off as a result of the deal, and there is no negative impact on U.K. consumers and businesses.”
The CMA provisionally found that the anticipated merger would lead to a significant lessening of competition in the following areas: the supply of certain types of gantry cranes (rubber-tired gantry cranes, automated stacking cranes); mobile equipment (reach stackers, heavy-duty forklifts, and empty container handlers); and straddle and shuttle carriers. They stated that they believed U.K. customers would have few remaining alternative suppliers after the merger.
Konecranes and Cargotec responded to the announcement saying that they disagree with the CMA’s provisional conclusions. They will consider the contents of the CMA’s initial findings and continue to engage with the CMA. They noted as a provision report, CMA would continue to consult with the companies and other stakeholders and has not made a formal request nor have the companies offered any remedies at this time.
In addition, Konecranes and Cargotec noted that they are continuing dialogues and cooperation with other relevant competition authorities, including the European Commission and the U.S. Department of Justice.
The U.K. authorities are due to issue their final report by April 1, 2022, while in the EU a Phase II review looking at the proposed combination in more detail began in July 2021. At the end of October 2021, the Australian Competition & Consumer Commission (ACCC) outlined its preliminary concerns about the merger. They noted that the two companies were the only suppliers of straddle carriers to Australia’s terminals. While noting the market is small for gantry cranes, they also expressed concerns and said they were also reviewing mobile container handling equipment as well as maintenance services. Australian regulators are scheduled to release their final report by mid-February 2022.
Following today’s announcement by the U.K. authorities, the companies said they are considering ways to mitigate some of the concerns raised by the different competition authorities.