PCC voids Chelsea acquisition of competitor

The Philippine Competition Commission (PCC) has nullified the acquisition by Chelsea Logistics Holdings Corporation of Trans-Asia Shipping Lines and imposed a R22.8-million fine for failing to notify the antitrust commission about the deal in December, 2016.

However, the nullification of the Trans-Asia deal also led to PCC’s conditional clearance of a related transaction — the acquisition by Chelsea of KGLI-NM Holdings, Inc. which controls 2Go Group, Inc.

The latter transaction involves the acquisition by Chelsea Logistics of shares in KGLI-NM to consolidate its majority ownership in KGLI-NM and gain a 52.98 percent stake in 2Go.

“PCC’s investigation initially found that control of both 2Go and Trans-Asia by Chelsea would lead to a substantial lessening of competition affecting Roll-On/Roll-Off passenger shipping services (RoPax),” said the PCC.

This is because both operate the Cebu-Cagayan De Oro, Cagayan De Oro-Cebu, Cebu-Ozamis, Ozamis-Cebu, Cebu-Iligan and Iligan-Cebu legs; and cargo shipping services in the same areas plus the Cebu-Zamboanga leg.

“In these legs, 2Go and Trans-Asia overlap or compete directly with each other,” the PCC said.

With the Trans-Asia agreements out of the picture because of the nullification order, the overlaps with 2Go in the six legs of passenger shipping services and 7 areas in cargo shipping services in Visayas and Mindanao found earlier in PCC’s Statements of Concerns have been ruled out.

PCC ordered Trans-Asia to inform the antitrust commission within 30 days from execution of merger or acquisition agreements involving any of its shares after the nullification order.

On the other hand, if Chelsea Logistics’ parent entity Udenna Corporation or any of its subsidiaries/affiliates pursue the purchase or re-execute the voided Trans-Asia deal, the parties should notify the transaction to PCC regardless of whether it is notifiable under the mandatory notification regime of the Philippine Competition Act.

“Every M&A notification subjected to PCC review is evaluated in a fair and transparent manner with the public’s welfare as foremost concern. There are sanctions for violations, there are clearances when there are no competition concerns,” said PCC Chairman Arsenio M. Balisacan.

Chelsea Logistics and the former owners of Trans-Asia disagree with the PCC decision.

“Notification to the Commission is not required since Trans-Asia’s Net Asset Value (NAV) at the time of the sale was way below the Commission’s R1.0 billion threshold,” Chelsea said.

The parties argue that the basis for the R1.0 billion Size of Transaction Threshold should be computed based on net assets instead of gross assets.

Trans-Asia had debts on its books which brought down its NAV to not even half of the Commission’s R1.0 million threshold,” said Chelsea.