Singapore moves against Wilhelmsen’s planned Drew acquisition

MAY 28, 2018 – The Competition and Consumer Commission of Singapore (CCCS) has issued a provisional statement of decision finding that the planned US$400 million acquisition by Wilhelmsen Maritime Services AS of Drew Marine’s technical solutions, fire, safety and rescue businesses is likely to result in a substantial lessening of competition in the market for the supply of marine water treatment chemicals (including ancillary materials and services) in Singapore, thereby infringing section 54 of the Competition Act (Cap. 50B) which prohibits anti-competitive mergers.

The CCS finding follows a U.S. Federal Trade Commission administrative complaint filed in February charging that the proposed $400 million acquisition of Drew Marine Group would violate U.S. antitrust laws (see earlier story).

CCCS has provisionally found that the parties’ combined market share in the supply of marine water treatment chemicals in Singapore is substantial. The next largest competitor has less than one-twentieth of the parties’ combined market share. Given the sensitivity of marine equipment, says CCCS, a consistent and reliable supply of marine water treatment chemicals is particularly critical. The parties’ substantial market position stem from the quality of their global supply networks, including stock availability, consistency, and service and response times. CCCS has found that, in contrast to other suppliers, the parties are able to supply their products across a wide range of ports globally, and have sufficient stock availability across a range of products that enable them to respond quickly to the delivery needs of their customers’ vessels calling at these ports. In addition, the parties are able to provide strong technical support and ancillary value-added services across their supply networks, and are viewed by customers as having overall reliability in the supply of marine water treatment chemicals.

CCCS has also made a provisional finding that the parties are each other’s closest competitor. The closeness of competition between the parties can be seen from the recent capture of significant market share from Wilhelmsen by Drew the supply of marine water treatment chemicals in Singapore. Further, says CCCS, the parties’ perceptions of each other as set out in their internal strategic documents, customer purchasing data and feedback, as well as the Parties’ internal weekly sales reports relating to customer contracts won and lost, support this provisional finding that the Parties are each other’s closest competitor.

CCCS is of the provisional view that post-transaction, competitive pressure from existing players in this market (e.g. through bidding for the same customer) will not likely be sufficient, and any potential entry by competitors will also not likely be timely and sufficient in extent to offset the anti-competitive effects of the proposed transaction. In addition, given that each customer constitutes a small fraction of the parties’ sales, and self-supply by customers is generally not feasible, customers would not likely be able to counteract the merged entity’s ability to raise prices post-transaction.

Considering the above, CCCS has provisionally found that the Proposed Transaction could lead to a substantial lessening of competition in the market for the supply of marine water treatment chemicals in Singapore. In turn, this could lead to higher prices and/or a reduction in choice and quality of supply of marine water treatment chemicals for such customers that require deliveries in Singapore.

The parties now have 10 working days from the receipt of the SDP to make their representations to CCCS. CCCS will then decide whether to issue a favorable or unfavorable decision, after consideration of the representations, as well as all available information and evidence. The parties may also offer commitments to address the potential competition concerns.