PCC opens 2nd review of ICTSI acquisition of Manila North Harbor

The Mergers and Acquisitions Office (MAO) of the Philippine Competition Commission (PCC) has opened a Phase 2 review to conduct a more detailed inquiry into the proposed acquisition by International Container Terminal Services, Inc. (ICTSI) of shares in Manila North Harbour Port, Inc. (MNHPI).

The transaction involves ICTSI’s proposed acquisition of shares in Harbour Centre Port Terminal, Inc. shares which would bring its current shareholding to 50.00 percent. Post-transaction, ICTSI will own and control 50 percent shareholdings in MNHPI, with the remaining shares held by San Miguel Holdings Corporation (43.33%), IZ Investment Holdings, Inc. (6.50%), and Petron Corporation (0.17%).

ICTSI is a port management company dealing with international shipments and operating in various countries. On the other hand, MNHPI operates the Manila North Harbour which services domestic cargoes in the Port of Manila.

In the Philippines, ICTSI operates in Laguna, Olongapo, Batangas, Davao, Cagayan de Oro, and South Cotabato. It also owns and operates the Manila International Container Terminal which services international cargo from the Port of the Manila.

MNHPI a subsidiary of SMHC, a company owned by San Miguel Corporation, which is a Philippine conglomerate with interests in food and beverage, packaging, properties, fuel and oil, energy, infrastructure, and banking industries. The ultimate parent entity of San Miguel is Top Frontier Investment Holdings, Inc.

The initial market investigation conducted by MAO indicates that the transaction may affect the port industry, particularly the markets for the provision of port operation and transshipment services in the Port of Manila. In accordance with the Philippine Competition Act and its Implementing Rules. PCC’s MAO has a period of sixty (60) days from 15 November 2018 to carry out the Phase 2 of the review.

In its statement, the PCC explained that the commencement of Phase II Review of the Transaction does not mean that MAO has made a definitive finding of substantial lessening of competition or has prejudged the review.

“This only signifies that a more detailed analysis of the Transaction is required using additional information from ICTSI, Manila North Harbour, and third parties to determine whether the Transaction will likely to lead a substantial lessening of competition in the market for port operation and transshipment services,” said PCC in a statement.

Particularly, PCC’s merger review office seeks to investigate whether the transaction enhances the ability and incentive of the involved firms to engage in foreclosure of competitors where vertical relationships between the ICTSI and Manila North Harbour operations are present, including transshipments. A transshipment is the shipment of goods or containers to an intermediate destination, then to yet another destination.