The Philippine Competition Commission (PCC) has approved the proposed acquisition by International Container Terminal Services, Inc. (ICTSI) of additional shares in Manila North Harbour Port, Inc. (MNHPI).
The Commission, in a decision dated March 14, said it resolved not to take further action on the proposed deal but that it “would have had a different conclusion on the proposed transaction” if “not for the presence of… existing regulatory barriers to entry.”
PCC found the “proposed transaction will likely result in substantial lessening of competition in the identified relevant market for the provision of port operations services for foreign containerized cargoes in the Port of Manila, if not for the existing regulatory barriers to entry.”
In a regulatory disclosure, ICTSI said it received on March 15 PCC’s approval of its proposal to acquire 15.17% of the total issued and outstanding shares in MNHPI of Harbor Centre Port Terminal, Inc. (HCPTI). With the acquisition, ICTSI’s shares in MNHPI increase to 50% from 34.83%.
ICTSI will also have interest in both international and domestic port operations in Manila.
The Commission said its decision is “without prejudice to the Commission’s exercise of its full powers under the Philippine Competition Act and its rules and regulations, should there be any changes in the factual circumstances relevant to the proposed transaction as represented by ICTSI and MNHPI, or in the existing regulatory regime, policy, or practice covering both foreign and domestic containerized cargo.”
Noting the Philippine Ports Authority’s (PPA) position that North Harbor is a dedicated domestic terminal, and with the Bureau of Customs suspending orders that would allow MNHPI to handle foreign cargoes, the decision said “the entry of MNHPI into the market of the provision of port terminal services for foreign containerized cargo is not likely.”
ICTSI’s potential entry into HCPTI’s other terminal in Manila, Harbour Centre, was also looked into, but the PCC said based on information disclosed by parties, “there does not appear to be sufficient evidence supporting a finding that Mr [Enrique] Razon [Jr.] or ICTSI exercises control over Harbor Centre,” and that based on observations of the Merger and Acquisition Office, “there is no substantial likelihood of concentration in the markets for the provision of port services for domestic containerized cargo and domestic break-bulk cargo.”
Razon is ICTSI’s chairman and a controlling shareholder of Port Capital, which owns the land where Harbor Centre is located.
In September 2017, ICTSI signed a share purchase agreement to acquire 10.449 million MNHPI shares from Petron Corporation, the acquisition representing 34.83% of the total issued and outstanding shares. On September 5, 2018, ICTSI signed a share purchase agreement to acquire HCPTI’s 4.550 million shares in MNHPI.
The remaining shares in MNHPI are being held by San Miguel Holdings Corporation at 43.33%, IZ Investment Holdings, Inc. at 6.50%, and Petron Corporation at 0.17%.
ICTSI operates and develops ports around the world, with Manila International Container Terminal as its flagship operation. Its subsidiaries also operate ports in Subic, Misamis Oriental, Davao del Norte, and General Santos, among others.
MNHPI, on the other hand, has a 25-year concession to modernize and operate domestic terminal North Port at Manila North Harbor under a PPA contract.
ICTSI said the transaction would allow it to contribute its experience, expertise, and state-of-the-art technology and infrastructure toward enhancing the operational efficiency of North Port and improving the traffic condition in Metro Manila.
