THE Philippine Competition Commission (PCC) voided Chelsea Logistics Holdings Corp.’s (CLC) acquisition of Trans-Asia Shipping Lines, Inc. for its failure to notify the antitrust body of the 2016 deal.
In its June 28 decision released on Tuesday, the PCC said the company consummated the Trans-Asia deal without securing the Commission’s approval, even though the size of the transaction fell under the compulsory notification threshold of P1 billion at that time.
The PCC also imposed a P22.8- million fine on CLC and its parent Udenna Corp. led by businessman Dennis A. Uy, as well as Trans-Asia.
The nullification of the Trans-Asia deal, however, paved the way for the PCC’s conditional clearance of Chelsea’s acquisition of KGLI-NM Holdings, Inc., which in turn controls 2Go Group.
“With the Trans-Asia agreements out of the picture because of the nullification order, the overlaps with 2Go in the 6 legs of passenger shipping services and 7 areas in cargo shipping services in Visayas and Mindanao found earlier in PCC Mergers and Acquisitions Office’s Statements of Concerns have been ruled out,” the PCC said in a statement.
The consummation of the two deals, according to the PCC, would have translated to “a substantial lessening of competition” in Roll-On, Roll-Off passenger shipping services in Cebu-Cagayan De Oro; Cagayan De Oro-Cebu; Cebu-Ozamis; Ozamis-Cebu, Cebu-Iligan; and Iligan-Cebu.
In a disclosure to the stock exchange yesterday, CLC said it is currently deciding if it will file a motion for reconsideration before the PCC or elevate the case to the Court of Appeals.
“Chelsea and the sellers are convinced that the Commission should reconsider what the parties consider an unfair decision. The twin voiding of the transaction and the penalty of P22.8 million is likewise unduly harsh in light of the ambiguity in the Commission’s own rules, the listed company said.
CLC insisted they were not required to notify the PCC of the deal since Trans-Asia’s net asset value (NAV) at the time of the sale was “way below” the P1-billion threshold.
“The parties argue that the basis for the P1 billion size of transaction threshold should be computed based on ‘net assets.’ Trans-Asia had debts on its books which brought down its NAV to not even half of the Commission’s P1-billion threshold,” the company added.
CLC further noted the PCC only released the guidelines, which stated the computation of merger notification thresholds should be based on gross assets, not net assets, in December 2017 or a year after the Trans-Asia deal.
“It will be recalled that the Commission early this year raised its own Size of Transaction threshold to P2 billion citing as reason that transactions below this amount will not likely raise competition issues,” CLC said.
Meanwhile, CLC President and Chief Executive Officer Chryss Alfonsus V. Damuy refuted the PCC’s claim there will be a thinning of market competition if the company acquires both 2Go and Trans-Asia.
“It is not possible. There are so many other players around and existing players on those routes,” Mr. Damuy said in a mobile message on Tuesday, noting there are four existing players in some of the cited routes such as the Cebu to Cagayan De Oro.
Should CLC still pursue the Trans-Asia deal, the PCC said the firm can notify the antitrust commission within 30 days from the execution of the merger or acquisition agreements involving any of its shares.
The PCC said if Udenna, CLC’s parent, or any of its subsidiaries or affiliates re-execute the voided transaction, the parties should notify the PCC “regardless of whether it is notifiable under the mandatory notification regime of the Philippine Competition Act.
“Every M&A (merger and acquisition) 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,” PCC Chairman Arsenio M. Balisacan was quoted as saying in a statement. — Janina C. Lim

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