Acquisition by Heineken International B.V. of Asia Pacific Breweries Limited

Notifying Parties:

Heineken International B.V.

Notifying Date:

25 September 2012

Summary of Transaction:

(i)            the names of the merger parties;

The merger parties in this notification are Heineken International B.V. (“Heineken”) and Asia Pacific Breweries Limited (“APB”).

(ii)          a description of the transaction;

This notification relates to the proposed acquisition (the “Proposed Acquisition”) by Heineken of up to the entire issued and outstanding ordinary share capital of APB, pursuant to share purchase agreements for the shares of APB and Asia Pacific Investment Pte Ltd (“APIPL”).

(iii)         a description of the business activities of the merger parties worldwide and in Singapore;

Heineken is an international investment holding company and operates in the Singapore domestic beer market only indirectly through its investments in APIPL and APB. All Heineken® beer within the local Singapore duty-paid market is produced and distributed by APB. Heineken separately directly operates in the global duty-free beer market through the distribution, marketing and sale of beer by its internal global duty-free department (“GDF”) as well as its wholly-owned subsidiary in Singapore, Heineken Far East Pte. Ltd. (“HFE”).

APB is a management and international investment holding company, and operates in the Singapore domestic beer market, as well as the global duty-free beer market through its various wholly-owned subsidiaries. Its subsidiaries operate in the local domestic and global duty-free beer markets through the production, distribution, marketing and sale of beer. The only APB subsidiary which operates in the global duty-free beer market is Tiger Export Pte Ltd (“TEPL”).

(iv)         a description of the overlapping goods or services, including brand names;

As all Heineken® beer within the local Singapore duty-paid market is produced and distributed by APB, there are no overlapping goods or services supplied by the Merger Parties in Singapore, other than in a part of a small segment of the distribution of beer by the Merger Parties to global duty-free distributors, retailers, ship chandlers and airlines.

For the purposes of the global duty-free beer market, Heineken is the owner and distributor of the following beer brands appearing downstream in duty-free retail outlets in Singapore:

- Heineken

- Amstel

- Murphy

For the purposes of the global duty-free beer market, APB is the owner and/or distributor of the following beer brands appearing downstream in duty-free retail outlets in Singapore:

- Tiger

- Anchor

- Raffles Export Lager

- Baron’s Strong Brew

- ABC Extra Stout

(v)          a description of substitute goods or services;

Goods that would reasonably be considered to be close demand-side substitutes to the overlapping goods (beer distributed through duty-free channels) are other duty-free alcohol available at such distribution channels (e.g. other duty-free alcohol like spirits, wine). In addition, an argument may also be made that in relation to gift purchases by end-customers, other duty-free products such as perfume, cigarettes, etc. which are sold in the same vicinity as the overlapping goods (e.g. duty-free shops at airports), may also be considered close substitutes to the overlapping goods.

(vi)         The applicant’s views on:

a. definition of the relevant market(s);

The only overlap which exists between Heineken’s and APB’s business activities in Singapore, and thus Heineken’s definition of the “Relevant Market” in this notification, is the global duty-free beer market. By “global duty-free market”, Heineken is referring to markets where, in accordance with applicable law, sales of the products to end customers for their personal consumption are free of consumer sales taxes and duties where such sales take place, including but not limited to supplies to duty-free shops, bonded stores, diplomatic representations, ship chandlers, seagoing vessels, airlines and airline catering, drilling rigs, and foreign military forces. Heineken submits that the Relevant Market is by its very nature, global in scope, as it cannot be confined or restricted to any one particular jurisdiction.

b. the way in which competition functions in this market;

Competition in the Relevant Market is intense, with the presence of many other major global beer brewers, including Anheuser-Busch InBev, Carlsberg, and SAB Miller. Competitors compete in each of the various channels of the Relevant Market (e.g. duty-free distributors and retailers, ship chandlers and airlines) on various aspects, including branding and image, pricing and taste. 

c. barriers to entry and countervailing buyer power; and

Existing beer brewers with existing brand equity, global pricing and supply chain logistics may enter the Relevant Market relatively easily with the necessary capital expenditure on advertising and promotions, listing fees and marketing support fees. There have been several instances of market entry in recent years including Hoegaarden, and regional beer producers could potentially enter the Relevant Market and provide a competitive constraint on the Merger Parties.

Countervailing buyer power in the Relevant Market is robust as the intermediate direct-customers of the Merger Parties are very large corporate groups/ entities, which have relatively high and strong bargaining power and are able to switch suppliers with relative ease based on the availability of various beer brands at competitive prices.

d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

Non-coordinated effects are unlikely to arise in the Relevant Market, due to the low barriers to entry in the Relevant Market for existing brewers, the strong buyer power of intermediate direct-customers of the Merger Parties, the global scope of the Relevant Market as well as other competitive pressures arising based on heavy price competition.

Coordinated effects are similarly unlikely to arise in the Relevant Market due to the insignificant change in the existing market structure post-transaction, the global nature of the market, as well as the strong buyer power functioning as restraints against coordination of behaviour amongst competitors.

Decision:

The proposed merger, if carried into effect, will not infringe the section 54 prohibition.

Decision Date:

5 November 2012

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