PCC voids, fines Chelsea-Trans-Asia acquisition deal

The Philippine Competition Commission (PCC) has voided the acquisition deal involving Chelsea Logistics Holdings Corp. and Trans-Asia Shipping Lines as the transaction will result in lessening competition in shipping industry.

Chelsea and Trans-Asia were also slapped with a P22.8-million fine for not notifying the antitrust body about the transaction in December 2016, the PCC said in a statement on Tuesday.

The antitrust body said that parties involved should have informed the PCC before consummating the transaction as Trans-Asia had gross assets of P1.142 billion, breaching what was then the P1-billion threshold for compulsory notification of mergers and acquisitions.

“An agreement consummated in violation of this requirement to notify the commission shall be considered void and subject the parties to an administrative fine of 1 percent to 5 percent of the value of the transaction,” the PCC said.

However, nullifying the Trans-Asia deal has led to the conditional clearance of a related transaction, the acquisition by Chelsea of KGLI-NM Holdings Inc.—the controlling entity behind 2Go.

The Chelsea-KGLI-NM deal covers the acquisition of KGLI-NM shares that gives Chelsea the enough equity to consolidate 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,” the antitrust body said.

“In these legs, 2Go and Trans-Asia overlap or compete directly with each other,” the commission noted.

With the Trans-Asia deal nullified and out of the picture, the issue of overlapping businesses with 2Go in the six legs of passenger shipping and seven areas in cargo shipping in Visayas and Mindanao found earlier in the statements of concerns by the PCC have been ruled out.

In light of the nullification order, the PCC ordered Trans-Asia to inform the commission within 30 days of the execution of merger or acquisition agreements involving any of its shares.

Should Chelsea’s parent firm, Dennis Uy-led Udenna Corp., or any of its subsidiaries or affiliates pursue the purchase or re-execute the voided Trans-Asia deal, the parties should notify the antiturst body 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,” PCC Chairman Arsenio Balisacan said.

The maritime trade and shipping transport firm Chelsea is a wholly-owned subsidiary of Udenna Corp., while Trans-Asia is primarily engaged in cargo and passenger shipping.

Udenna was looking forward to expanding Chelsea into the prime mover of goods and passengers in the Philippines as it consolidated its stakes in 2Go and other
shipping businesses. —Ted Cordero/VDS, GMA News