Fincantieri-Chantiers Deal Extended as Antitrust Inquiry Continues
The French government has agreed to a one-month extension on a deal to sell a controlling interest of French defense and cruise shipbuilder Chantiers de L'Atlantique to Italian competitor Fincantieri. The expiry date for the MOU between the French state (Chantiers' current majority owner) and Fincantieri is December 31, and without a political solution, the agreement's future was in jeopardy.
The sale has so far been unable to secure antitrust approval from EU regulators, who have expressed concerns that it could affect competition in the cruise ship construction market. Fincantieri, Chantiers and Germany's Meyer Werft and MV Werften build the overwhelming majority of the world's full size cruise ships, drawing on a well-developed pool of specialized European contractors, tradesmen and supply houses. Previous foreign attempts to replicate that supply chain have proven unsuccessful.
The commercial market has changed drastically since early 2018, when the parties concluded the terms of the sale, and the EU's concerns date back to a period that has now ended. In October 2019, the European Commission launched an expanded investigation in order to address concerns that thriving cruise ship demand outstripped supply and that barriers to entry were too high for new competitors. "The transaction may therefore significantly reduce competition in the market for cruise shipbuilding, which could lead to higher prices, less choice and reduced incentives to innovate," the commission warned.
“Demand for cruise ships is booming globally," said European Commissioner for Competition Margrethe Vestager in a statement at the time. "Chantiers de l'Atlantique and Fincantieri are two global leaders in this sector. This is why we will carefully assess whether the proposed transaction would negatively affect competition in the construction of cruise ships to the detriment of the millions of Europeans taking cruise holidays every year."
In the spring of 2020, just months after her announcement, the global cruise industry effectively ceased operations due to the COVID-19 pandemic. Rather than raking in new orders, Europe's cruise shipbuilders have scrambled to defend their existing orderbooks from delays or cancellations. Competitor Meyer Werft decided to furlough staff for a six week period in mid-July due to a production slowdown, and it is said to be looking to cut costs by $1.4 billion over five years.
Well into its 14th month, the EC's review is still under way in a far different market environment. On Wednesday, Italian Industry Minister Stefano Patuanelli told media that the Italian and French governments planned to write to the EU Competition and Industry commission to finalize its inquiry into the deal.