ACCC blocks Sea Swift takeover of Toll marine business


Appeal to be made but Toll Marine Logistics Australia’s NT and FNQ operations may need another buyer

ACCC blocks Sea Swift takeover of Toll marine business
Northern Australian marine freight consolidation has hit a wall.

 

Sea Swift and Toll have failed to convince the Australian Competition and Consumer Commission (ACCC) that a combined marine freight firm was unlikely to lessen competition substantially.

But the issue remains alive, with Toll to appeal the decision.

"Toll is disappointed with the decision by the ACCC to disallow the sale of the assets of its Northern Territory and Far North Queensland marine freight operations," the company says.

"We have been in regular contact with the ACCC about the dire situation the business faces since announcing the intention to sell last November.

"And drastic action is needed due to the particularly difficult market conditions faced by our marine logistics business in the Northern Territory and Far North Queensland in recent years.

"We will now lodge an application to the Australian Competition Tribunal seeking its approval for the transaction to proceed. The tribunal process is expected to take approximately four months after which time there will be a definitive ruling on the sale.

"In the meantime, Toll will continue with the provision of its existing services."

The ruling which came just days after Toll formally confirmed a June 11 undertaking to continue providing marine freight services in the Northern Territory (NT) and Far North Queensland (FNQ) before November 30, unless the matter is resolved sooner or in other agreed circumstances.

Sea Swift has proposed a $45 million purchase of Toll division Toll Marine Logistics Australia’s NT and FNQ business.

"Sea Swift and Toll Marine are the two largest suppliers of marine freight services in the NT and FNQ and, on many routes, are the only two suppliers of scheduled freight services. Over the last two years, they have been engaged in a price war with each other," ACCC commissioner Roger Featherston says.

"During this price war, Toll has agreed to sell its business to Sea Swift for a substantial amount of money, and a 20 per cent shareholding in Sea Swift.

"Not only would this merger eliminate the competition between them, it would also increase the barriers to entry or expansion for other freight providers.

"The proposed transaction strengthens Sea Swift’s position and power in these markets and denies other freight suppliers the opportunity of expanding as a consequence of any exit by Toll."

"As far as the ACCC is aware, Toll did not offer its business on the market or look for any other potential acquirer of the business or of any of the assets used in its business."

"As Sea Swift is the party with the most to gain from an end to the price war and Toll’s exit from these markets, it is not surprising that Toll considered Sea Swift would pay the highest price for the business, but the ACCC has to consider the effects upon competition, not the commercial benefits to the party selling the assets."

The ACCC and its chairman, Rod Sims, have previously expressed a preliminary view that the proposed acquisition was likely to substantially lessen competition.

While the parties offered undertakings, the ACCC says it "considered the proposed undertakings and decided they were incapable of addressing the competition concerns".

The watchdog intends to issue a public competition assessment in due course.

Further ACCC information is available here.

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