Wednesday, October 11, 2017

Monopoly Concerns Over Maritime Industry Takeover if Two Biggest Players Merge  

Singapore Authorities Query May Trigger Multi-Million Dollar Termination Fee

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Shipping News Feature SINGAPORE – The Competition Commission of Singapore (CCS) has raised its concerns on the proposed acquisition by Wilhelmsen Maritime Services (WMS) of sole control over the technical solutions business from Drew Marine. WMS and Drew Marine Technical Solutions (DMTS) are two of the largest players in the market of supplying chemical, gases, and welding equipment to the maritime industry leading to the anti-competition authority to believe that the merged entity will have a monopoly in the sector.

On 10 August 2017, WMS applied for a decision by the CCS on whether the Proposed Transaction would infringe the prohibition in the Competition Act (Cap. 50B) against anti-competitive mergers. The CCS has since raised competition concerns with WMS on the Proposed Transaction, based on information furnished by WMS and DMTS, and third-party feedback from customers and other suppliers during the Phase 1 review.

As part of the transaction, the business, people and competence in Drew Marine Technical Solutions will be transferred to Wilhelmsen. Approximately 400 Drew Marine employees will join Wilhelmsen Ships Service upon completion of the transaction. The deal, which has a purchase price of around $400 million, is amongst the largest investments in Wilhelmsen's history. If approval from relevant bodies is not received, the parties have agreed on a termination fee of $20 million.

In coming to its decision, the CCS pointed out that the two Parties appear to be each other’s closest competitors and that alternative suppliers may face difficulty achieving sufficient geographic scale to be viable alternative sources of supply and to exert sufficient competitive pressure on the merged entity post-merger, especially for customers that procure on a global basis. The CCS says that the Proposed Transaction may therefore substantially lessen competition in the supply of these products in Singapore, and may lead to price increases, deterioration in quality of products and/or service levels.

At this stage, WMS and DMTS may accordingly offer commitments to address the potential competition concerns that may arise as a result of the Proposed Transaction, or the merger will proceed to a detailed Phase 2 review upon CCS’s receipt of the relevant documents from WMS. Commitments may also be offered at any time during a Phase 2 review.

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