Silk Logistics’ (ASX:SLH) shares have fallen 12% in the first hour of trade on Thursday as the ACCC takes issue with DP World’s proposed takeover offer at $2.14/share.
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DP World – a Dubai-based logistics giant with an Australian arm – first announced plans to acquire Silk in early-mid November last year, causing SLH shares to run up to $2.08/sh.
DP World stated its rationale that “Silk Logistics is a comprehensive port-to-door logistics services provider which operates 21 logistics hubs and 25 warehousing sites across five Australian states,” ultimately aligning with DP World’s desires to further consolidate its Oceania footprint.
But now the competition regulator has raised concerns, threatening DP World’s expectations that the deal would pass in 1HCY25.
“Our review is focused on DP World Australia’s ability and incentive to either increase terminal fees or worsen the quality of terminal services for container transport providers that compete with Silk, after the acquisition,” ACCC chief Dr. Philip Williams said.
“This could lead to higher prices and reduced quality for Australian importers and exporters.”
The regulator is also concerned DP World could offer lower prices to importers and exporters previously tied to Silk, so long as they use DP World terminals, which would eventually cause competition to drop out of the game.
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Then, in that world, the combined DP World and Silk could then raise prices again, and there’d be no-one else to go to.
As far as ACCC concern notices go, it’s a fairly strong response from the regulator – thus underscoring the -12% drop in SLH on Thursday as some investors wonder whether this hasn’t killed the deal.
“The ACCC’s container stevedoring monitoring role … indicates that there is currently very limited competition between stevedores on terminal charges to container transport providers,” the ACCC added.
SLH last traded at $1.74.
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