A shift in major cargo shipping companies could mean higher prices for goods in Hawaii.
Horizon Lines announced Tuesday it is selling its Hawaii shipping operation to The Pasha Group for roughly $141.5 million.
In becoming part of Pasha, Horizon’s Hawaii business would operate alongside Pasha’s existing operations.
“Since Pasha entered the Hawaii transportation circuit nearly 10 years ago, we have elevated the quality of customer service,” said George Pasha, IV, President and CEO. “With this acquisition, we will supplement that service and provide an improved, more competitive offering on the Hawaii trade lane.”
In a separate transaction, also announced Tuesday, Horizon is merging with Matson in a $456.1 million deal that includes its Alaska operations and all non-Hawaii business liabilities.
All three companies say the change will greatly expand the opportunities for shipping between the mainland and Hawaii, but an economist KHON2 spoke to has concerns.
That’s because it would mean having one less option for shipping, as both Pasha and Matson already service Hawaii.
As an economics professor at the University of Hawaii at Manoa, Sumner La Croix studies the current state of economies in the Asia-Pacific region. He says he’s skeptical of this multi-million dollar merger.
“Matson and Horizon are two big competitors in Hawaii. Clearly the antitrust authorities wouldn’t allow this merger, so Matson essentially had to not buy Horizon’s Hawaii service. Instead, they sold it to Pasha. They’re a third player in Hawaii’s market,” La Croix explained. “As a result of this merger, Hawaii’s market is reduced from three to two players. That’s always a concern with small firms.”
KHON2 asked, could this affect prices on goods like food and clothing?
“It’s possible the everyday person would see some increase in goods, but mergers also take place because firms expect to see cost savings, and cost-savings can also push prices down,” La Croix said. “At this point, it is too early to tell.”
Costco says it has a pre-existing relationship with The Pasha Group and doesn’t see its prices rising right now.
The Hawaii Department of Transportation said in a statement Tuesday that “the Harbors Division will continue to work with all partners in shipping cargo to and from the islands and remains committed to a diverse shipping marketplace that provides the best possible service and prices for Hawaii’s consumers.”
Under the terms of the agreement, Pasha will acquire certain subsidiaries of Horizon constituting substantially all of Horizon’s Hawaii trade-lane business, including four Jones Act container ships.
Immediately following Pasha’s acquisition of Horizon’s Hawaii trade-lane business, Horizon will be acquired by Matson pursuant to a merger.
The transaction is expected to close in 2015, subject to regulatory approval, satisfaction of the closing conditions to the merger of Horizon and Matson and other customary closing conditions.
“Horizon’s Alaska business represents a natural geographic extension of our platform as a leader serving our customers in the Pacific,” said Matt Cox, president and chief executive officer of Matson. “We are also encouraged by the long-term prospects of the Alaska market, which mirrors Hawaii in many operational ways, despite different underlying economic drivers. Both markets depend on reliable, superior and timely container cargo service as part of vital supply lifelines – hallmarks of the Matson brand.”
Horizon also operates a domestic liner service in Puerto Rico. The company says it plans to shut down that operation by the end of the year.