The UK Competition & Markets Authority (CMA) has blocked the merger between the two Finnish cargo handling equipment manufacturers, Konecranes and Cargotec.
According to the CMA’s final report issued today (29 March), the remedies – which would have removed all overlapping businesses of the two companies and were accepted by the European Commission (EC) – would not be effective in addressing the CMA’s concerns and thus the planned merger between Konecranes and Cargotec cannot be completed.
Although the two companies obtained clearances for the planned merger from numerous competition authorities, including, EC, the State Administration for Market Regulation, which is the competition authority in China, and nine other jurisdictions, the completion of the merger would have required approvals from all relevant competition authorities, including UK CMA.
Therefore, Konecranes and Cargotec have decided to cancel the planned merger.
In response to feedback received from the CMA during the course of their investigations, the boards of directors of Konecranes and Cargotec considered amending the remedy package offered to the EC further, as well as offering alternative remedy packages to address the concerns raised by the CMA, according to a joint statement of the two Finnish companies.
“The boards of directors did not, however, find any satisfactory solution which would have addressed the concerns of the CMA and which would have been in the best interest of the shareholders of Konecranes and Cargotec, and of the combined company, without jeopardising the rationale of the proposed merger as presented on 1 October 2020,” said the statement.
Ilkka Herlin, chairman of Cargotec commented, “The Board of Cargotec is convinced that the merger would have created substantial value for the entire industry as well as shareholders by improving sustainable material flow. The combination would have created a strong European company enabling accelerated shared abilities to innovate without harming competition. We have done all we could to realise the merger and are disappointed that our plans have had to be abandoned. After a long and extensive regulatory review process and merger planning preparations it is time to shift our full focus on executing Cargotec’s own strategy and value-creation opportunities.”
In a similar vein, Christoph Vitzthum, chairman of Konecranes, stated, “The combination of Konecranes and Cargotec, as planned and announced on 1 October 2020, would have created a company that would have been greater than the sum of its parts. The merger control process has been extensive and the investigations thorough, and Konecranes Board of Directors is disappointed that the remedy package offered did not satisfy the concerns of all regulators. At the same time, we believe that further remedies would have not been in the best interest of Konecranes’ shareholders as they would have changed the strategic rationale of the transaction.”
Konecranes and Cargotec announced they will immediately cease the pursuit of the merger and the related processes and continue to operate separately as fully independent companies.
By the end of 2021, Konecranes had booked €56 million (US$62 million) and Cargotec €57 million (US$63 million) of merger-related transaction and integration planning costs. The total transaction cost estimate of €125 million (US$138 million), excluding integration planning costs, remains valid. “The final transaction and integration planning costs will be reported when available,” said the statement.
