Bid for Toll Marine continues as competition tribunal gets arguments in favour
The Australian Competition Tribunal (ACT) has received backing from Sea Swift customers and competitors in its effort to unblock its takeover of Toll Marine Logistics
The Australian Competition and Consumer Commission (ACCC) has issues with Champ Ventures-owned Sea Swift’s bid to buy Toll’s northern Australia business and a way has been sought around that.
According to submissions Sea Swift has provided, the regular and reliable services are seen by many customers at least as important as the firm’s pledge on scheduled services and prices.
Some larger customers, though, are concerned that competition has kept the operators sharp and that sort of pressure might diminish if one firm dominates.
Others have noted what they viewed as unsustainable pricing in the course of competition between then-newcomer Toll and Sea Swift in the past.
In his submissions former Perkins director Antony Perkins, now project development director with Qube Ports and Bulk, highlights the high fixed costs of supplying remote and far-flung areas.
Perkin says the experience of previous decades has been that a new entrant has forced freight prices down unsustainably but this period of competition has led to one party leave the trade.
In this way, he has seen some firms selling out while Shorebarge and Tiwi Barge along with a number of unnamed small barge operators exited and Brambles bought Jardines Shipping.
Perkins Shipping was ultimately bought by Toll.
“For two vessel operators to be able to operate sustainably to one community, the prices would need to increase to cover the increase fixed costs of both vessels delivering to that community,” Perkins says.
“In have not witnessed this occur.”
Another former Perkins executive, now landowner Gumatj Corporation’s CEO, Klaus Helms, who has 40 years working in remote northern Australia, supports Perkins’ observation on the short tenure of second operators.
Helms believes that demand is not available presently to support more than one enterprise.
“Based on my experience, without commercial development of Nhulunbuy, I do not think two sea freight operators can be supported,” he says.
“Further, with the ongoing improvement of road services and a population that is not growing, there will not be sufficient cargo to guarantee a regular weekly service for two operators in the long term.”
Helms also believes Toll is likely to ditch the operation in any event.
Other long-term aboriginal corporation managers echo his general view.
Of those concerned with a loss of competition, fuel supplier Puma Energy is one, though key account manager for the region Bruce Donnan recognises the market is small.
Donnan also notes “there are always barge operators who can take on new routes and services, and there is always someone who is prepared to have a go”.
However, reliability is also important and he sees Sea Swift’s pledge on scheduled services and prices as important, as was the threat of disruption if Toll, with which Puma has a contract, left the market due to the sale being halted.
Coastal operator Bhagwan Marine’ managing director, Loui Kannikoski, is another that reckons the likes of Sealink Barge Transport, Northline, Shore Barge or Ezion Holdings could step up if Toll left the market but only if the circumstances suited.
Bhagwan, which briefly examined buying Sea Swift three years ago at around the time Champ bought it but declined due to the community freight market’s tough nature and the lack of fit with its existing business, would not consider entering the market for the same reason.
By contrast, Pacific Marine Group (PMG) managing director Terry Dodd says PMG would jump into the market with the right deal and if it had the right equipment but profitability has always been a problem.
Dodd considers the market can only sustain one large operator, though that might change if a big mining operation in the region took off, and he is not concerned about a Toll-Sea Swift link-up
Sea Swift sees the ACT review taking up to three months.
“We would like to take this opportunity to reinforce that Sea Swift remains committed to servicing our customers in Northern Australia regardless of the outcome of this Tribunal process,” the company says.
It has made commitments in the event of the takeover occurring that would not be available if Toll departs unilaterally.
These can be found here while a more detailed document can be found here.