Shares of Silk Logistics Holdings Ltd (ASX:SLH) plunged 17.7% to A$1.63 on Thursday after Australia's competition watchdog flagged concerns over its acquisition by logistics giant DP World. The drop pushed Silk's stock to its lowest since November, significantly below DP World's A$2.14 per share buyout offer.

The Australian Competition and Consumer Commission (ACCC) warned that the deal could stifle competition, as Silk is one of Australia's few door-to-door container logistics providers. DP World, a global logistics powerhouse, could gain excessive control, potentially limiting competition and raising costs for container transport providers.

"Our review is focused on DP World Australia's ability and incentive to increase terminal fees or degrade terminal services for competitors after the acquisition," said ACCC Commissioner Philip Williams. The regulator also expressed concerns about DP World accessing sensitive commercial data from Silk's rivals, which could further disrupt fair competition.

The ACCC has invited submissions from stakeholders regarding the acquisition, signaling that regulatory hurdles remain before the A$174.5 million deal, announced in November, can proceed.

DP World, headquartered in Dubai, is one of the world's largest port operators and logistics firms. If the takeover is approved, it could significantly expand its presence in the Australian container transport and logistics market. However, regulatory scrutiny may pose challenges to closing the deal.

Investors reacted negatively to the ACCC's concerns, causing Silk's stock to underperform the ASX 200, which rose 0.3% on the same day. The fate of the acquisition now hinges on the competition watchdog's final decision, which could impact Australia's logistics industry in the long run.