European Commission conditionally approves the proposed merger of Cargotec with Konecranes

The proposed merger of two of the leading providers of cargo handling equipment, Cargotec and Konecranes, cleared an important regulatory hurdle winning conditional approval from the European Commission. Closing of the merger however continues to be delayed with the company saying that with reviews still underway by other authorities, the completion by the first half of 2022 seems more challenging.

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. They were targeting closing the merger before the end of 2021 but encountered strong objections from port authorities and customers which led to more extensive competition reviews. In addition to EU approval, the transaction is being reviewed by authorities including in Australia, the UK, and the United States.

The UK’s Competition and Markets Authority, for example, said that it provisionally found that the anticipated merger would lead to a significant lessening of competition in the supply of certain types of gantry cranes, mobile equipment, and straddle and shuttle carriers. The UK. Like any of the regulatory authorities said they were concerned that customers would have few remaining alternative suppliers after the merger.

“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 Competition and Markets Authority inquiry group reporting on the provisional findings of their investigation in November 2021.

“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 European Commission’s conditionally approval of the planned merger between Konecranes requires the divestment of Konecranes’ Lift Truck business and Cargotec’s Kalmar Automation Solutions. Konecranes’ Lift Truck business includes the manufacturing and commercialization of reach stackers, full container handlers, empty container handlers, as well as forklift trucks. Cargotec’ Kalmar Automation Solutions business consists of its full cranes and straddle/shuttle carrier business.

The companies had proposed this remedy to the European Commission in September 2021, which triggered a new extensive investigation and widespread consultation with market participants across Europe. The commission ultimately accepted the company’s position that the divestitures would eliminate overlaps in the container handling equipment businesses of the companies while allowing the combined company to realize the benefits of the proposed merger.

Three weeks ago, at the beginning of February, the companies issued a statement saying that “based on ongoing dialogue with authorities, the remedy requirements are more complex than expected.” While they have gained conditional EU approval, they are still working with others including the US Department of Justice. The Australian Competition & Consumer Commission outlined its preliminary concerns focusing on the fact that the two companies were the only suppliers of straddle carriers to Australia’s terminals. Australian regulators were scheduled to release their final report by mid-February 2022., while the UK authorities are due to issue their final report by April 01, 2022.

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