The Philippine government's anti-trust body has nullified an acquisition deal finalised in 2016 between two local shipping companies.
The Philippine Competition Commission (PCC) recently announced its ruling to void Chelsea Logistics Holdings Corporation's (CLC) December 2016 acquisition of Trans-Asia Shipping Lines after having gathered evidence that the former company failed to notify the anti-trust body about the transaction.
The decision dated June 28 was published in a statement released by the PCC to the local press in Manila on Tuesday, July 3.
The nullification has led the commission to grant CLC conditional clearance of its separate acquisition of KGLI-NM Holdings, which in turn has a nearly 53 per cent controlling stake in local ferry and supply chain operator 2GO Group.
2GO and Trans-Asia had been competing directly with each other for the same Ro-Pax and cargo routes in the Visayas and Mindanao island groups prior to the acquisition.
The PCC's investigation found that CLC's control of both 2GO's and Trans-Asia's passenger and cargo shipping legs would lead to a "substantial lessening of competition" in some of the vital inter-island routes in the southern half of the country.
The commission also reiterated the rule of compulsory notification of mergers and acquisitions whose size of transaction exceeded 1 billion pesos (US$18.72 million) after they announced their findings that Trans-Asia had 1.142 billion pesos (US$26.58 million) in assets at the time of the acquisition.
CLC and parent company Udenna Corporation have been fined 22.8 million pesos (US$426,000) for proceeding with their acquisition of Trans-Asia without notifying the commission.
CLC President and CEO Chryss Alfonsus Damuy refuted the PCC's claim of thinning competition, stating the considerable number of other shipping lines that are currently vying for the same Visayas and Mindanao inter-island routes.
The company also pointed out the apparent ambiguity in the PCC's own rules, stating that the size of transaction was to be originally based on net assets rather than gross assets.
CLC asserts that Trans-Asia's debts at the time of the acquisition have brought its net asset value down to well below the 1-billion-peso threshold.
The company further states the PCC's ruling that the merger notification threshold will be based on gross assets rather than net assets was only formally announced in December 2017, barely a year after the acquisition.
Damuy told reporters that the company is presently consulting with its legal team to determine possible means of responding to the PCC's decision.
