Mergers: Commission clears the merger of Cargotec with Konecranes, subject to conditions

(Source: European Commission)

The European Commission has approved, under the EU Merger Regulation, the proposed merger between Cargotec and Konecranes. The approval is conditional on the divestiture of certain businesses.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Cargotec and Konecranes are two global leaders of container and cargo handling equipment. Port terminal operators, logistics companies and a wide range of industrial players in Europe depend on this equipment to lift and carry containers and heavy loads. In the current container shipping industry landscape, we needed to make sure that this merger would not harm the supply chains by further price increases. Following the remedies offered by the two companies, customers in Europe will continue to have sufficient choice of port equipment and will continue benefitting from competitive prices and a great choice of technology.”

Today’s decision follows an in-depth investigation into the proposed merger of Cargotec and Konecranes. The two companies are the largest European and amongst the leading global manufacturers of container and cargo handling equipment, as well as providers of terminal automation solutions.

The Commission’s investigation

During its in-depth investigation, the Commission received feedback from a broad range of market participants, including terminal operators, and cranes and other container handling equipment manufacturers.

Following its market investigation, the Commission had concerns that the transaction, as initially notified, would have substantially lessened competition and likely led to higher prices in the European Economic Area, with respect to a number of container and cargo handling equipment types, in particular in the areas of:

rubber-tired gantry cranes;

straddle/shuttle carriers;

mobile equipment, and in particular reach stackers, empty container handlers and heavy-duty lift trucks (>10 tonne capacity).

For each of these areas, the merged entity would have very large market shares and only face competition from very few remaining competitors. European customers would not have effective access to new suppliers of container and cargo handling equipment, due to significant existing barriers to entry. As a result, European terminals and industrial customers would have faced higher prices and reduced choice of these critical pieces of equipment.

In addition, the Commission’s investigation found that the transaction, given the vertical integration of Konecranes’ mobile equipment business with Cargotec’s spreaders business, would have restricted access to a sufficient customer base for competing mobile equipment spreaders suppliers.

The proposed remedies

To address the Commission’s concerns the companies offered the following commitments:

In the rubber-tired gantry cranes, and straddle and shuttle carriers markets, Cargotec committed to divest its full cranes and straddle/shuttle carrier business, including a manufacturing plant in Poland and a licence for use of Cargotec’s Kalmar brand for the divested product categories.

In the mobile equipment markets, including for mobile equipment spreaders, Konecranes committed to divest its business for the manufacturing and commercialisation of reach stackers, full container handlers, empty container handlers, as well as forklift trucks. This includes manufacturing plants in Sweden and China, and contracts with distributors.

These commitments fully address the competition concerns identified by the Commission. Feedback received from several customers, distributors and competitors in the market test of the proposed commitments confirmed the Commission’s view that the divested assets constitute viable businesses that would enable suitable buyers to effectively compete with the merged entity.

The Commission therefore concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.

Cooperation with other competition agencies

A number of competition agencies, including those in the US, the UK, Australia, New Zealand, Singapore and Israel, are still investigating the proposed merger. The Commission is in regular contact with these agencies.

Companies and products

Cargotec, based in Finland, offers equipment and services in particular for cargo handling in ports and terminals, as well as for ship and road transport (including container handling equipment and terminal automated solutions) through its Kalmar business.

Konecranes, also based in Finland, offers equipment and services in particular for lifting and cargo handling in shipyards, ports and terminals, such as container handling equipment and automation technology.

Merger control rules and procedure

The transaction was notified to the Commission on 28 May 2021 and the Commission opened an in-depth investigation on 2 July 2021.

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

There are currently three on-going phase II merger investigations: the proposed acquisition of Recticel by Greiner, the proposed acquisition of Grail by Illumina, and the proposed acquisition of Trimo by Kingspan Group.

More information will be available on the competition website, in the Commission’s public case register under the case number M.10078.

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