THE Philippine Competition Commission (PCC) nullified the acquisition by Chelsea Logistics Holdings Corp. of Trans-Asia Shipping Lines Inc. and imposed a P22.8-million fine for their failure to notify the antitrust commission about the transaction in December 2016.
The nullification of the Trans-Asia deal also led to PCC’s conditional clearance of a related transaction—the acquisition by Chelsea Logistics Holding Corp. of KGLI-NM Holdings Inc., which in turn controls 2Go.
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 the 2Go group.
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) in 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.
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 seven 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.
In two separate decisions dated June 28, 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 Corp. 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 is a wholly-owned subsidiary of Udenna Corporation. Through its subsidiaries, it is engaged in maritime trade and shipping transport. On the other hand, Trans-Asia is primarily engaged in domestic shipping by transporting passengers and cargoes.
In a separate statement, Chelsea and former owners of Trans-Asia expressed disagreement with the 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 P1-billion threshold. The parties argue that the basis for the P1-billion size of transaction threshold should be computed based on net assets,” a disclosure made by Chelsea Logistics to the Philippine Stock Exchange stated.
The company said Trans-Asia had debts on its books that brought down its NAV to not even half of the Commission’s P1-billion threshold.
The parties to the voided transaction are weighing their options, whether to file a motion for reconsideration with the PCC or go straight ot the Court of Appeals.
“As the decision is not yet final, it has no impact to the business, operations and financial conditions of Chelsea,” the company said. (PR)