Merger of Cargotec and Konecranes blocked by UK authorities
The long-awaited merger of two Finnish manufacturers of lifting equipment, Cargotec and Konecranes, will not happen since it has been blocked by the UK Competition & Markets Authority. Both companies have jointly decided to cancel the planned deal despite receiving approval from the European Commission issued a month ago.
“Following an in-depth Phase 2 investigation, the Competition and Markets Authority (CMA) found that 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 British antitrust authority reported on Tuesday, 29 March. Such a momentous decision has forced both companies to cancel their plans. They will continue to develop their businesses as separate entities.
No remedies no deal
During the investigation run by the CMA, the Finnish manufacturers proposed some remedies to address the concerns of Britain’s authority regarding container handling equipment products as they are crucial for the future development of the country’s ports and maritime terminals. The joint scheme of Cargotec and Konecranes include the spinning of the dedicated units of both manufacturers and their further merger into a separate independent company. However, the body found this plan inefficient for keeping balance in the market. “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 CMA explained.
As a result, the British authority offered both manufacturers to develop new remedies. “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,” UK’s governmental body stated.
Before submitting documents to the CMA, Cargotec and Konecranes have received approvals from eleven antitrust authorities including those in China, the European Union. The European Commission issued its approval on 24 February but with some cautionary notes. They were also related to container handling equipment products. It allowed the Finnish companies to spin off their dedicated units and combine them into a new company. The authorities of Australia and the US are still investigating the issue. Nevertheless, the Finnish manufacturers have immediately cancelled their plans.
“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,” commented Christoph Vitzthum, the chairman of Konecranes. His company issued a separate press release with statements about its future. According to the document, Konecranes will continue to develop its own products for strengthening its position in the market. Meanwhile, the Konecranes Board of Directors has started the process to find a new CEO for the company. As for Cargotec, it will unveil its position on Wednesday, 30 March.