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- Proposed Acquisition by Bread Talk Group Limited of Food Junction Management Pte Ltd
Proposed Acquisition by Bread Talk Group Limited of Food Junction Management Pte Ltd
11 September 2019
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Reference: | CCCS 400/140/2019/003 |
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Notifying Party: | Topwin Investment Holding Pte Ltd |
Notifying Date: | 4 September 2019 |
Summary of transaction: | (i) the names of the merger parties; (a)Topwin Investment Holding Pte Ltd (“Topwin”), a wholly owned subsidiary of BreadTalk Group Limited (“BT”); and (b) Food Junction Management Pte Ltd (“FJM”) (ii) a description of the transaction; The notification relates to the proposed acquisition by Topwin of 100 per cent. of the issued share capital in FJM (the “Proposed Transaction”). (iii) a description of the business activities of the merger parties worldwide and in Singapore; Topwin Topwin’s principal business activity is that of investment holding and provision of management services. Topwin’s subsidiaries are in the business of rental of stalls in the food court premises that they manage, and sale of food and beverage in food courts, in Cambodia, China, Hong Kong, Malaysia, Singapore, Taiwan and Thailand. As a group, BT’s primary business is in food and beverage retail, and operates and franchises close to 1,000 outlets in various formats in and outside of Singapore, including bakeries, restaurants, food courts and cafes. BT’s business of operating food courts and food court stalls in Singapore is solely operated by Food Republic Pte Ltd (“Food Republic”), except for certain mini restaurants (located within the food court premises operated by Food Republic) which are operated by other subsidiaries of BT. FJM FJM and its subsidiaries, namely Food Junction Singapore Pte Ltd (“FJS”) and T&W Food Junction Sdn Bhd (“TWFJ”), are principally in the business of operating food court premises and food court stalls in Singapore and Malaysia. (iv) a description of the overlapping goods or services, including brand names; BT and FJM (the “Parties”) primarily overlap in the following: (a) the sale of drinks, fruits, snacks, desserts and hot meals to individual consumers in food court premises; and (b) the rental of stalls to food vendors located within food court premises, (collectively referred to as the “Overlapping Products”). (v) a description of substitute goods or services; Topwin submitted that from the demand-side perspective, the closest substitutes for drinks, fruits, snacks and hot meals in food court premises are those found in hawker centres and coffee shops. The demand-side substitutes for a food vendor to renting stalls in food court premises would be to rent such stalls in a hawker centre or coffee shop. From the supply-side perspective, the substitutes for the sale of drinks, fruits, snacks, desserts and hot meals in food court premises are food vendors in other hawker centres, coffee shops or food halls, who can move into setting up their own standalone premises for the sale of food, or leasing individual stalls from the master lessors or landlords. The supply-side substitutes for the rental of stalls in food court premises would be other operators of coffee shop and hawker centre premises leasing space to food vendors for the sale of cooked food. (vi) the applicant’s views on: a. definition of the relevant market(s); Topwin submits that the relevant markets are: the sale of hot meals to individual consumers in food courts, coffee shops and hawker centres within catchment areas of 500 metre radius; and the rental of stalls to food vendors located within food court and coffee shop premises within catchment areas of 500 metre to one kilometre radius. b. the way in which competition functions in this market; Topwin submits that both relevant markets are highly competitive. The sale of hot meals is a highly contested space in which suppliers of hot meals in food courts, coffee shops and hawker centres compete primarily on price, quality, convenience and variety of offerings with competing suppliers located within the vicinity. For rental of stalls to third-party stall operators, operators of coffee shop and food court premises mainly compete on price, location, rental terms and conditions, and also on the store concept, quality of the premises and fittings, and overall management services. c. barriers to entry and countervailing buyer power; and Barriers to entry The barriers to entry and expansion are low in both relevant markets, as it is not unduly restrictive or onerous for vendors and operators to obtain the necessary operating licenses and approvals from the Government. Moreover, new hawker stall tenants can leverage government subsidies to defray their start-up cost. Further, as most stalls in food courts and coffee shops typically come pre-fitted with basic infrastructure, this would reduce the start-up capital required by any new tenant. As the Urban Redevelopment Authority (“URA”) continues to undertake large-scale re-development plans in many regions across Singapore, more sites are expected to be made available for coffee shop and food court operations in the short and medium term. In addition, an increasing number of master lessors are adopting the use of technologies within their premises, which would reduce the amount of operational costs required for market entry and expansion. Countervailing buyer power For the sale of hot meals, individual consumers virtually face no switching cost and generally have various options of cooked food providers available to them within walking distance. Consumers can also self-supply by bringing their own meals from home to consume at work, or for certain out-of-home purposes. For the rental of stalls, there are no restrictions on the tenant switching to another food court or coffee shop operator, upon contract expiry. Food vendors are generally able to switch to competing outlets easily after their contracts expire, as stalls within food court and coffee shop premises typically come fitted with basic infrastructure. Further, if the rental terms offered by BT are not competitive when contracts are negotiated, tenants can easily switch, with minimal cost, to other coffee shop and food court premises at other locations, or threaten to switch to negotiate for better terms. d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant). Non-coordinated effects Topwin submits that the Proposed Transaction will not give rise to non-coordinated effects in the relevant market for the sale of hot meals to individual consumers in food courts, coffee shops and hawker centres within catchment areas of 500 metre radius, because:
Topwin submits that the proposed Transaction will not give rise to non-coordinated effects in the relevant market for the rental of stalls to food vendors located within food court and coffee shop premises within catchment areas of 500 metre to one kilometre radius, because:
Coordinated effects Topwin submits that coordinated effects will not arise as a result of the Proposed Transaction, because:
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Decision: | The Proposed Transaction, if carried into effect, will not infringe the section 54 prohibition of the Competition Act (Cap. 50B). |
Decision Date | 15 October 2019 Read the media release. Read the Grounds of Decision. |