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The competition regulator has approved the $174.5 million acquisition of one of Australia's only door-to-door container logistics providers, Silk Logistics Holdings (ASX: SLH), by Dubai-headquartered multinational DP World after raising initial concerns.
DP World, which services a third of the containers processed at the four ports from which it operates in Australia in Melbourne, Botany, Brisbane and Fremantle, faced scrutiny over the takeover's potential to add pressure on prices for importers and exporters in an already tight logistics market.
However, today the Australian Competition and Consumer Commission (ACCC) decided not to oppose the transaction after considering detailed responses from the global group.
If the acquisition is then approved by the Foreign Investment Review Board (FIRB), DP World owns infrastructure to haul import and export containers with trucks to and from the ports where it operates.
"Although DP World Australia may be able to engage in subtle forms of discrimination without adversely affecting its primary function as a container terminal, such conduct is unlikely to reach a level so as to substantially lessen competition," says ACCC Commissioner Dr Philip Williams.
"DP World Australia would continue to face competition from a range of established and prospective container transport providers."
The ACCC considered the integration of DP World Australia’s container terminals with Silk’s national container transport and warehousing business and the potential impact on container transport service providers in the supply chain.
The regulator focused on whether DP World Australia would have the ability and incentive to engage in discriminatory conduct against Silk’s container transport rivals by raising their costs or lowering their quality of access to DP World Australia’s terminals.
Its analysis indicated that DP World Australia was unlikely to engage in forms of discriminatory conduct that would lead to material operational delays and disruption at DP World’s terminals.
The ACCC concluded that a reduction in DP World Australia’s ability to efficiently process containers at its terminals would risk the group losing shipping lines to other terminals, damaging its own business.
SLH shares plummeted more than 22 per cent after the regulator issued its statement of issues in March, dropping to $1.37 per share in early April. Shares have been slowly rising since then, and today surged 22.67 per cent to $2.11 - just shy of the $2.14 per share purchase price under the scheme implementation deed signed by the two companies.
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