Silk Logistics Holdings Ltd (ASX: SLH) shares are being sold off on Thursday.
At the time of writing, the door-to-door container logistic provider's shares are down 26% to $1.46.
But this has nothing to do with market volatility.
Instead, there are concerns that the ASX stock's proposed takeover could be about to collapse.
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What's going on with this ASX stock?
This morning, the Australian Competition and Consumer Commission (ACCC) raised preliminary competition concerns over the proposed $174.5 million takeover of Silk Logistics by Dubai-based logistics and shipping company DP World.
The competition regulator notes that Silk is one of the only national door-to-door container logistic providers in Australia. It hauls import and export containers using trucks to and from the ports that DP World Australia is operational at.
The proposed acquisition would result in DP World Australia, a major container stevedore, owning a national container transport provider.
The ACCC's Commissioner, Dr Philip Williams, said:
We have heard concerns that DP World's ownership of a national container transport provider is likely to reduce competition in the supply of container transport services. This could lead to higher prices and reduced quality for Australian importers and exporters.
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.
Dr Williams has concerns that DP World could lower prices to squeeze out competition before ultimately increasing them. He adds:
We are also assessing whether DP World Australia, after acquiring Silk, is likely to offer below-cost transportation prices to importers and exporters if their containers are also picked up and dropped off at DP World Australia's stevedoring terminals. This is because a discounting strategy involving below-cost prices could reduce container transport competition allowing a combined DP World Australia and Silk to raise prices later.
Company response
The ASX stock has responded to the news this morning. It advised that it will consider the impact of the ACCC's process on the scheme timetable and then provide a further update to the market as soon as possible.
Nevertheless, the company and DP World Australia remain committed to the transaction and will continue to work together to progress ACCC and FIRB approval, as well as all other regulatory steps required for implementation of the scheme.
In addition, the ASX stock's directors continue to consider that the scheme is in the best interests of shareholders and unanimously recommend that they vote in favour of the transaction. This is in the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interests of shareholders.
But given how much its shares have fallen today, it appears that the market isn't feeling very confident that the deal will complete.
