Konecranes and Cargotec merger off
Konecranes and Cargotec - owner of Hiab, Kalmar and MacGregor - have decided to abandon their planned merger.
The ‘straw that broke the camel’s back’ was a ruling by the UK Competition & Markets Authority (CMA) which has not accepted the EU’s solution which involved the sell-off of overlapping businesses, mostly those involved with port handing equipment such as the Konecranes Lift Truck business and Kalmar Automation Solutions.
The CMA’s final report issued today, stated that the European Commission’s solution
“would not be effective in addressing the CMA’s concerns”. The authority had expressed concerns over reduced competition in rubber tyre gantry cranes, automated stacking cranes, shuttle carriers, container handlers, heavy duty forklifts, reach stackers and automated terminal tractors. See: Merger concerns for Konecranes Cargotec
Cargotec and Konecranes were already apprehensive over the requirements demanded by the European Commission, the UK ruling has now sealed its fate.
Cargotec and Konecranes had already obtained clearances for the planned merger from 10 competition authorities, including the State Administration for Market Regulation in China. Completion of the merger remained subject to further approvals including the Department of Justice in the USA, with which Cargotec and Konecranes have been holding a continuous dialogue.”
The boards of the two companies considered what might be required to satisfy the outstanding approvals and “concluded that it is in the best interest of each of Cargotec and Konecranes and their respective shareholders that the merger is cancelled".
Cargotec chairman Ilkka Herlin said: “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.”
Christoph Vitzthum, chairman of Konecranes added: “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 will continue to drive its strategy and pursue value-creation potential on a standalone basis.”
By the end of 2021, Konecranes had booked €56 million and Cargotec €57 million of merger related transaction and integration planning costs.
It is hard to understand what issues the CMA could possibly have had over this merger, especially given some the ‘doozies’ it has approved in the past. Cargotec and Konecranes were already facing deal fatigue and perhaps on verge of abandoning this deal based on the demands already set out by other authorities. Discussions with the US might also have been signalling further issues. A line in the February announcement of the EU approval said: ”The approval terms have turned out to be more challenging than thought” which resulted in a further delay. At that point, reading between the lines, the deal looked precarious and it seems the UK was selected as the ruling to deliver the ‘coup de grace’.
The deal approval process has dragged on for 18 months and will have cost in the two companies in the region of €125 million. Surely both will now be suffering from ‘merger fatigue’?
See: Cargotec and Konecranes to merge