The UK CMA has blocked the merger between Cargotec and Konecranes. The companies have cancelled their planned merger.
The UK Competition & Markets Authority has blocked the merger between Cargotec and Konecranes. According to the CMA’s final report issued today, the remedies – which would have removed all overlapping businesses of the two companies and were accepted by the European Commission – would not be effective in addressing the CMA’s concerns; thus, the planned merger between Cargotec and Konecranes cannot be completed.
The completion of the planned merger would have required approvals from all relevant competition authorities. Thus, Cargotec and Konecranes have called it off. The merger had been approved by China’s State Administration for Market Regulation and nine other jurisdicitions. The European Commission had accepted it subject to certain divestments, and Cargotec and Konecranes were still in dialogue with the US Department of Justice.
On this basis, the European Commission gave the proposed merger its “conditional approval.” However, in its statement today, the CMA said: “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.
“This loss of competition could have serious consequences for UK port terminals and other customers, including higher prices and lower quality products and services across a wide range of container handling products.
Cargotec and Konecranes submitted remedies to seek to address the CMA’s concerns. The proposed remedies would have involved carving out packages of assets from within each of their existing container handling equipment businesses, which could then be sold as a new combined business.
“Having tested the proposed remedies thoroughly, the CMA found that these asset packages lacked important capabilities, so would not enable whoever bought them to compete as strongly as the merging businesses do at present. The process of carving out these assets from the merging businesses’ existing operations, and knitting them together into a new combined business, would be complex and risky, so could significantly impair how effectively the purchaser of that business would be able to compete.
“As Cargotec and Konecranes declined to consider alternative remedies that would have involved the sale of one of their existing container handling equipment divisions, the CMA concluded that only the prohibition of the merger could effectively address the wide-ranging concerns that have been identified.”
WorldCargo News checked the meaning of that statement with the CMA, and it transpires that the CMA wanted the parties to dispose of either the whole of Konecranes Port Solutions or both of Kalmar Mobile Solutions and Kalmar Automation Solutions. Not surprisingly, this was not acceptable either to Cargotec or Konecranes.
Commenting on the CMA’s position, Cargotec and Konecranes stated jointly: “In response to feedback received from the CMA during the course of their investigations, the Boards of Directors of Cargotec and Konecranes carefully considered amending the remedy package offered to the EC further, as well as offering alternative remedy packages to address the concerns raised by the CMA.
“The Boards of Directors did not, however, find any satisfactory solution which would have addressed the concerns of the CMA and which would have been in the best interest of the shareholders of Cargotec and Konecranes, and of the combined company, without jeopardising the rationale of the proposed merger as presented on 1 October 2020.”
Ilkka Herlin, the Chairman of Cargotec, stated: “The Board of Cargotec 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. 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.
Christoph Vitzthum, the Chairman of Konecranes, stated: “The combination of Konecranes and Cargotec, as planned and announced on 1 October 2020, 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.
“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.”
By the end of 2021, Konecranes had booked €56M and Cargotec €57M of merger-related transaction and integration planning costs. The total transaction cost estimate of €125M (excluding integration planning costs) remains valid. The final transaction and integration planning costs will be reported when available.
Konecranes is organising a webcast today, Tuesday, 29 March at 11.00h EECT (CET + 1). The company has also cancelled its AGM scheduled for tomorrow, 30 March.
Cargotec is organising a webcast tomorrow, Wednesday 30 March at 10.00h EECT (CET + 1)
Cancellation of the merger plans means that Cargotec can keep the Multi-Assembly Unit (MAU) in StarGard, Poland as it is. It emerged early this month that it had planned to transfer all lift truck production from the MAU to another location, so the whole of the MAU would be available to whomever acquired Kalmar Automation Solutions.
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