Summary of transaction:
(i) the names of the merger parties;
(a) Cargotec Corporation (“Cargotec”); and
(b) Konecranes Plc (“Konecranes”)
(collectively, the “Parties”).
(ii) a description of the transaction;
The notification relates to the proposed merger between Cargotec and Konecranes (the “Proposed Transaction”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
Konecranes is a Finnish public limited liability company headquartered in Hyvinkää, Finland, and its shares are listed on Nasdaq Helsinki. Konecranes is specialised in lifting solutions for various applications. It offers material handling solutions for general manufacturing and process industries, container handling equipment and respective automation solutions and many kinds of services and spare parts.
Konecranes’ business activities in Singapore primarily relate to the sale of container handling equipment such as empty container handlers. In addition, Konecranes is also active in the marketing and selling of industrial lifting equipment such as cranes, hoists and providing related services such as maintaining, replacing and upgrading the said equipment. Konecranes also trades in, installs and maintains building maintenance units, mechanical carpark systems, indoor warehouse trucks, aerial working platforms and serialised construction equipment in Singapore.
Cargotec is a Finnish public limited liability company seated in Helsinki, Finland, and its B-shares are listed on Nasdaq Helsinki. Cargotec offers many kinds of material flow solutions, ranging from cargo and load handling equipment (manual and automated) to engineering solutions for the maritime industry. Its main activities are divided into three businesses: (i) Cargo handling equipment and terminal solutions are offered by Kalmar, (ii) on-road load handling equipment is provided by Hiab and (iii) solutions and services for the maritime industry are provided by MacGregor.
Cargotec’s business activities in Singapore mainly relate to the sale of container handling equipment such as automated guided vehicles, terminal tractors, empty container handlers and reach stackers. The full range of equipment supplied by Cargotec globally is available for sale to Singapore customers.
(iv) a description of the overlapping goods or services, including brand names;
The Parties submit that, based on their respective sales data for the period from 2018 to 2020, they only overlap in the supply of empty container handlers (“ECH”) in Singapore.
Separately, with reference to the period 2010 - 2021, the Parties submit that they have supplied or sought to supply the following products in Singapore:
AGVs, automated RTGs, ECH and RS shall be collectively referred to as the “Overlapping Goods”.
- automated guided vehicles (“AGVs”);
- automated rubber tyred gantry cranes (“automated RTGs”); and
- reach stackers (“RS”).
(v) a description of substitute goods or services;
The Parties submit that close substitutes for the Overlapping Goods supplied by the Parties would be the Overlapping Goods supplied by other competing manufacturers, such as:
- ECH and RS: Hyster-Yale Materials Handling, Inc., Sany Heavy Industry Co., Ltd. (“Sany”), Taylor Machine Works, Inc., Svetruck AB, CVS Ferrari S.P.A and Shanghai Zhenhua Heavy Industries Company Limited (“ZPMC”). According to the Parties, there is a degree of substitutability between ECH, RS, full container handlers and forklift trucks.
- AGVs: ZPMC, VDL Automated Vehicles, Gaussin SA, ST Engineering and Toyota / Hoist. According to the Parties, there is also a degree of substitutability between AGVs, straddle carriers, shuttle carriers and terminal tractors.
- Automated RTGs: ZPMC, Mitsui E&S Holdings Co., Ltd., Künz GmbH (Kuenz), China State Shipbuilding Corporation, Sany, Liebherr-International AG and JSC Baltkran. According to the Parties, close substitutes of automated RTGs include manual RTGs, rail mounted gantry cranes and automated stacking cranes. These are collectively known as “gantry cranes”.
(vi) The applicant’s views on:
(a) definition of the relevant market(s);
The Parties submit that the primary relevant market for the purpose of the CCCS’s review of the Proposed Transaction should be the market for the global supply of ECH.
For completeness, and based on the information in section (v) above, the Parties have also considered:
- the market for the global supply of AGVs;
- the market for the global supply of gantry cranes (which includes automated RTGs); and
- the market for the global supply of RS.
The above shall be collectively referred to as the “Relevant Markets”.
(b) the way in which competition functions in this market;
The Parties submit that competition in the Relevant Markets is characterised by the following megatrends:
- Chinese players have globally expanded in recent years and strive to dominate the industry.
- Customers require container handling equipment suppliers to deliver innovative solutions to meet their challenges around digitalisation and automation. Digitalisation and the expansion of stricter environmental regulations are key industry drivers, leading to fundamental changes in the area of container handling and logistics equipment.
- Equipment suppliers are also required to help their customers to considerably reduce their environmental footprint over the next years.
- According to the Parties, all of these developments give rise to the emergence of new players and business models, challenging traditional OEMs with new competitive solutions.
(c) barriers to entry and countervailing buyer power; and
Barriers to entry
The Parties submit that there are no significant factors that serve as barriers to entry for the Relevant Markets, either in Singapore or globally. This is in view of the following:
- All types of mobile equipment, such as RS, ECH, full container handlers and forklift trucks, are produced in versatile manufacturing facilities and manufacturers can easily divert capacity to produce other types of mobile equipment.
- AGV technology is widely available and suppliers of container handling equipment and trucks (i.e. hardware suppliers) can easily team up with tech companies to develop automated solutions. According to the Parties, this regularly happens in practice.
- With regard to gantry cranes (including automated RTGs), the Parties submit that, with adequate resources, suppliers of industrial equipment can and do enter the market for the supply of gantry cranes with relative ease. The resources and equipment required to manufacture gantry cranes does not materially differ from other types of port or industrial cranes.
- There are generally no significant impediments in terms of intellectual property rights, know-how, etc. that would hinder a supplier of other types of container handling equipment, e.g., forklift trucks, or other industrial machinery, to expand into the production of any of the Overlapping Goods.
- According to the Parties, as evidenced by the successful global expansion of Chinese players in just a few years, safety and regulatory standards worldwide for the Overlapping Goods can be met without difficulties. In addition, mobile equipment, including ECH and RS, are relatively commoditised when compared to other pieces of container handling equipment, such that quality and performance can easily be met by new suppliers.
Countervailing buyer power
According to the Parties, customers of container handling equipment are large and sophisticated buyers with significant buyer power, such as terminal operators and container shipping lines.
(d) the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The Parties submit that the Proposed Transaction will not give rise to any non-coordinated effects as the Merged Entity will be sufficiently constrained from exercising market power, and that the Proposed Transaction will not lead to a substantial lessening of competition within any of the Relevant Markets for the following reasons:
- strong prevailing state of competition from existing competitors;
- the threat of and ease of entry or expansion by potential competitors;
- significant countervailing buyer power and the ease of switching; and
- the availability of second-hand sales and leasing arrangements as alternatives to procuring new equipment.
The Parties submit that the Proposed Transaction will not give rise to any concerns of coordinated effects in the Relevant Markets, for the following reasons:
- the Relevant Markets will remain extremely competitive following the Proposed Transaction. The presence of a multitude and range of existing competitors of varying scales of operations means that it would not be possible for the merged entity to arrive at an alignment or coordination of its behaviour with other competitors. Any prospect of collusion is untenable or unsustainable;
- barriers to entry and expansion into the Relevant Markets are relatively low. As such, the Parties expect such new entrants, as well as the continued expansion of existing players, especially Chinese players such as ZPMC and XCMG, to disrupt any coordination strategy; and
- customers generally have the knowledge and expertise to make well-informed comparisons of alternatives available on the market, which facilitates the process of switching between different suppliers in response to price changes or any other reason.
The Parties submit that Cargotec supplies spreaders which are used as inputs by downstream manufacturers of cranes and mobile equipment, including Konecranes. However, the Parties submit that the Proposed Transaction will not lead to any vertical effects for the following key reasons:
- the Merged Entity will have no ability to foreclose downstream competitors from accessing spreaders as input component. According to the Parties, there are several other large standalone spreader suppliers, such as RAM SMAG Lifting Technologies Pte Ltd, Stinis Holland B.V. and ELME Spreader AB, as well as a number of smaller players with possibilities to expand significantly, which together already supply a significant portion of the market; and
- the Merged Entity will have no ability or incentive to engage in customer foreclosure strategies post-Proposed Transaction by diverting Konecranes’ demand for spreaders to the Merged Entity and therefore foreclosing access by spreader suppliers to a sufficient customer base. This is because Konecranes is not a significant customer for spreaders, and there are a number of other customers which will continue to account for a significant part of the demand in the upstream spreader markets, according to the Parties.