PCC clears AC Logistics acquisition of Air 21

Photo from Air21.
  • AC Logistics Holdings Corp.’s proposed acquisition of a controlling stake in Air 21 Holdings Inc. has obtained the green light from competition regulators
  • The takeover will not likely lessen competition substantially, according to the Philippine Competition Commission
  • PCC said the merged entity is “unlikely to gain a dominant market position due to its insignificant market share” in the logistics sector
  • AC Logistics agreed last November to acquire 60% of AHI for P6.06 billion by buying secondary shares and subscribing to primary shares

The Philippine Competition Commission has cleared AC Logistics Holdings Corp.’s proposed acquisition of a controlling interest in Air 21 Holdings Inc. (AHI).

In a decision dated May 31, 2022, the commission said it would take no further action on the proposed transaction between AC Logistics and AHI as it found the acquisition “will not likely result in substantial lessening of competition.”

AC Logistics signed an investment agreement in November 2021 to acquire 60% interest in AHI for P6.06 billion by buying secondary shares and subscribing to primary shares.

Subject to certain conditions, AC Logistics’ move will give it at least a 60% stake in AHI, which, in turn, will control eight logistics companies in the AHI network. These subsidiaries are Airfreight 2100 Inc. (Air21), Air 2100 Inc. (Air21 Subic), LGC Logistics Inc., Cargohaus Inc., U-Freight Phils. Inc., U-Ocean Inc., Waste & Resources Management Inc. (WARM), and Integrated Waste Management Inc. (IWMI).

After reviewing the findings and recommendation of its Mergers and Acquisitions Office as well as the parties’ submissions, PCC said the merged entity after the transaction is “unlikely to gain a dominant market position due to its insignificant market shares in the relevant markets.”

The competition watchdog said there are sufficient competitive pressures or constraints from other players in the nationwide markets for domestic courier and messengerial services, domestic airfreight forwarding, domestic sea freight forwarding, and domestic road freight forwarding.

The same can be said of the nationwide or regional market for trucking services, the local markets for general warehousing and storage services in Luzon, and cold storage services in Metro Manila and Southern Luzon, PCC said.

Further, in the nationwide market for domestic courier and messengerial services; the global markets for international air freight forwarding, and international sea freight forwarding; and the nationwide markets for hazardous waste management, and non-hazardous waste management, the parties “will have neither increased ability nor incentive to engage in input foreclosure by exclusively supplying its own downstream customers or restrict its services to other downstream markets or players,” the PCC added.

It is “highly unlikely that the transaction could effectively limit access of other players to a significant customer base in the same markets,” PCC said.

AC Logistics’ parent firm Ayala Corp. (AC) earlier said the acquisition involves 2.602 billion shares, whose aggregate price is less than 10% of AC’s total equity.

READ: Ayala’s logistics arm buys 60% of Air21 for P6B

To close the transaction, AHI owner Alberto D. Lina will need to fulfill conditions that include completing the consolidation of Lina’s equity interest in the operating companies in AHI, completing due diligence with results satisfactory to ACLogistics, and getting regulatory approval.

The proceeds will then be released to Lina and subscription payments will be paid to AHI once these conditions are satisfactorily closed.

AHI is a holding company owned by Lina that will consolidate his equity stakes inAir21, Air21 Subic, U-Freight, U-Ocean, Cargohaus, LGC, WARM and IWMI. Lina formed Air21 in 1979. It has since grown and is now under the Lina Group of Companies.

The Lina group operates in various industries ranging from logistics to information technology, food, environment, waste management, business process outsource, travel, communications and media.

AC said that with the acquisition of AHI through the various subsidiaries of AHI, AC Logistics will have an end-to-end logistics platform capable of serving the supply chain requirements of multiple industries in high-growth markets.

It noted that Air21 Group is engaged in a broad range of supply chain services covering door-to-door express delivery, international and domestic freight forwarding, warehousing and waste logistics management.

AC Logistics serves as AC’s investment vehicle in the logistics sector.

AC’s logistics portfolio includes Entrego Fulfillment Solutions Inc., a technology-driven end-to-end fulfillment solutions company, and AyalaLand Logistics Holdings Corp., which has principal stakes in holding companies, commercial leasing, industrial lot sales and development, and retail electricity supply.

Aside from AC, Metro Pacific Investments Corp.’s logistics arm, Metropac Movers Inc., acquired a 12% stake in Air21 in 2018. – Roumina Pablo