Summary of transaction:
(i) the names of the merger parties;
Purchaser: ContiTech Global Holdings Netherlands B.V. ("ContiTech")
Target: Printing Solutions Sweden Holding AB (the "Target")
Seller: Trelleborg AB ("Trelleborg", together with ContiTech and the Target, the "Parties").
(ii) a description of the transaction;
The notification relates to a proposed acquisition by ContiTech of 100% of the total issued shares in the Target from Trelleborg (the "Proposed Transaction").
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
Business Activities of the Merger Parties Worldwide
ContiTech is Continental AG's engineered rubber products group that supplies technical rubber products and plastics technology. ContiTech's key industries / activities include, but are not limited to:
- Advanced Dynamic Solutions: provides anti-vibration, suspension and sealing solutions and technologies in vehicles, machinery and other equipment;
- Conveying Solutions: develops, manufactures, and supplies conveyor belts and systems in mining, mechanical and plant engineering, and many other industries;
- Industrial Fluid Solutions: develops and produces a broad spectrum of products, encompassing hoses and hose lines for the crude oil and natural gas extraction industry, the food industry, water management, chemical/petrochemical industry, mining industry, mechanical engineering and other important sectors;
- Mobile Fluid Systems: develops and is an original equipment manufacturer of components and systems for passenger cars, commercial vehicles, busses & industrial vehicles;
- Power Transmission Group: develops and manufactures power transmission belts and matched components right up to complete belt drive systems; and
- Surface Solutions: provides polyamide or rubber-coated foils, sheets and fabrics, including printing solutions. For the avoidance of doubt, apart from the manufacturing and supply of printing blankets, the ancillary printing solutions offered by ContiTech on a worldwide basis includes, but are not limited to, surface materials for decorative and technical applications, and assembled products.
Trelleborg and Target
Trelleborg provides engineered polymer solutions that seal, damp and protect critical applications. Trelleborg's key industries / activities include, but are not limited to:
- Industrial Solutions: provides polymer-based critical solutions in selected industrial application areas and infrastructure projects;
- Sealing Solutions: supplies polymer-based critical sealing solutions and components deployed in general industry, automotive, and aerospace;
- Wheel Systems: supplies tires and complete wheels for off-highway vehicles and specialty applications;
- Printing Solutions: develops and manufactures printing blankets of polymer-coated fabrics. For the avoidance of doubt, apart from the manufacturing and supply of printing blankets, the ancillary printing solutions offered by Trelleborg on a worldwide basis includes, but are not limited to, flexo(graphic) carrier sleeves, and rubber coated fabrics in Italy;
- Offshore Oil and Gas: develops and manufactures polymer-based solutions for exploration and extraction of offshore oil and gas; and
- Rubber Products: develops and manufactures a broad range of technical rubber products.
The Target is a wholly-owned subsidiary of Trelleborg. The Target is in the printing industry and its product offering includes printing blankets for offset and digital printing, carrier sleeves for flexo printing as well as a supplementary local Italian coated fabrics business (the "Target Business"). The Target Business comprises Trelleborg’s Printing Solutions activities, and is the entire scope of business activities that will be transferred to ContiTech as part of the Proposed Transaction. For the avoidance of doubt, the Target only operates the Target Business and no other business.
Business Activities of the Merger Parties in Singapore
ContiTech engages in various activities in Singapore through its subsidiaries. Its activities in Singapore include, but are not limited to the supply of:
- flat-backed / fabric printing blankets;
- self-adhesive blankets (on a limited ad hoc basis);
- conveyor belt systems;
- elastomer sheeting;
- fluid handling;
- power transmission; and
- surface materials.
Trelleborg and Target
Trelleborg engages in various activities in Singapore through its subsidiaries. Its activities in Singapore include, but are not limited to the:
- supply of flat-backed / fabric printing blankets;
- supply of self-adhesive printing blankets;
- supply of engineered polymer solutions;
- manufacturing of rubber fenders;
- trading and supply of rubber matting, marine applications, industrial tyres; and
- supply of hydraulic seals, rotary shaft seals, o-rings, static seals, gaskets, oil seals, and pneumatic seals.
The Target, as a corporate entity, does not currently operate the Target Business in Singapore. The activities in Singapore relating to the Target Business are currently operated by Trelleborg, and include the supply of flat-backed / fabric printing blankets, and self-adhesive printing blankets. For the avoidance of doubt, the Target Business that will be transferred to ContiTech will also include the activities in Singapore relating to the Target Business as part of the Proposed Transaction.
(iv) a description of the overlapping goods or services, including brand names;
The Parties submit that in Singapore, ContiTech and the Target, with the Target Business, primarily overlap in the supply of flat-backed / fabric printing blankets, to among others, printing blankets distributors and end-user customers such as printing plants / printing houses.
In respect of the flat-backed / fabric printing blankets market in Singapore:
ContiTech sells its products in Singapore under the following brand names:
- Conti-Air; and
- Phoenix Xtra Blankets.
The Target Business, which is part of Trelleborg, sells its products in Singapore under the following brand name:
(v) a description of substitute goods or services;
The Parties are of the view that given the uniformity of all types of printing blankets, with the exception of metal back printing blankets, all types of offset printing blankets, including flat-backed / fabric printing blankets, are substitutable for each other after minor adjustments.
According to the Parties, these substitutes are offered by the Parties as well as other competing offset printing blankets manufacturers, such as Flint Group, Meiji Rubber & Chemical Co. Ltd., Kinyosha Co. Ltd., and other various Chinese manufacturers (e.g. Shanghai Xinxing Printing Equipment Co., Ltd., Shanghai Youlong Rubber Products Co. Ltd., Beijing Sanyou Weiye Rubber Chemical Co., Ltd., Hangzhou YuanYang Industries Co. Ltd., and Shanghai Sanding Printing Rubber Product Manufacture).
(vi) The applicant's views on:
a. definition of the relevant market(s);
The Parties submit that the relevant product market for the purpose of the Proposed Transaction should be the market for the supply of offset printing blankets (the "Relevant Product Market"). However, the Parties further submit that the primary overlapping product supplied by the Parties in Singapore is that of flat-backed / fabric printing blankets.
Offset printing blankets are consumables used for offset printing. They consist of a reinforced rubber sheet in a press that receives the inked impression and transfers it to the surface being printed. Offset printing blankets have a back layer made of either textile materials (fabric or flat-backed) or metal (metal back) requiring slightly different production techniques.
In addition to flat-backed and metal back printing blankets, there are:
- self-adhesive printing blankets, where there is a strong adhesive layer on the fabric in order to help it stick on printing press cylinders; and
- other offset printing blankets, which include blankets for security applications, mylar backed varnishing blankets, cylindrical printing blankets and underblankets.
The Parties submit that, in spite of certain differences between printing blankets' back layers or use in printing or varnishing, all such variations are part of the same relevant market. This is because they are both supply-side (manufacturers generally produce all blanket types) and demand-side substitutes (they can be installed on any offset printing machine and customer choice is guided by price and grades of print quality), being sold to the same customers. Thus, the Parties submit that the relevant product market should be considered as the market for the supply of offset printing blankets, without further segmentation.
With respect to the Relevant Product Market, the Parties submit that the Relevant Product Market is global in scope for the following reasons:
- orders of customers are often placed internationally and trade flows are international since the relevant suppliers are active worldwide;
- transportation costs are low;
- there are no regional or national differences or specifications in the relevant product;
- there are generally no regulatory barriers restricting the import of such products;
- competition between offset printing blankets manufacturers is worldwide; and
- customers in Singapore can easily and do obtain and import printing blankets from overseas and suppliers in Singapore are willing to supply globally.
b. the way in which competition functions in this market;
The Parties submit that they primarily overlap in the supply of flat-backed / fabric printing blankets in Singapore. Given that the characteristics of flat-backed / fabric printing blankets are largely uniform, the Parties submit that besides technical functionality, price is the most important parameter in the customers' decision-making process. There is healthy competition in the flat-backed / fabric printing blankets sector as customers are willing and have switched to new market entrants mainly due to their lower prices.
c. barriers to entry and countervailing buyer power
Barriers to entry
The Parties submit that there are no significant and insurmountable barriers to entry for the Relevant Product Market, in Singapore or globally. With specific reference to Singapore, given that the Parties are primarily present in the supply of flat-backed / fabric printing blankets market in Singapore, the Parties submit that there are also no technical, regulatory or IP related barriers to entry with respect to the supply of flat-backed / fabric printing blankets market in Singapore, for the following reasons:
- existing competitors that are not currently active in the supply of flat-backed / fabric printing blankets but are looking to supply flat-backed / fabric printing blankets in Singapore face relatively low barriers to entry in terms of know-how and or regulations, as offset printing blankets are generally uniform and can be easily substitutable amongst each other; and
- although new entrants may face some barriers given the lack of relevant experience and infrastructure, such barriers are not insurmountable as there are generally no import or export barriers for flat-backed / fabric printing blankets (save for obtaining a Customs permit through Singapore Customs), nor are there any regulatory barriers for supplying flat-backed / fabric printing blankets in Singapore. Further, the capital expenditure required for a new entrant to gain a five (5) per cent market share would be recoverable should the new entrant decide to exit the market (e.g. through the sale of machinery and equipment).
Countervailing buyer power
The Parties submit that local intermediate customers (i.e. distributors in Singapore) are able to self supply through obtaining their flat-backed / fabric printing blankets from printing blanket manufacturers (including both Parties) around the world. End-user customers are also able to switch suppliers easily and quickly, without incurring any significant technical or commercial switching costs in the process. These factors above will allow both intermediate and end-user customers to exert strong countervailing power on the merged entity post-Proposed Transaction.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The Parties submit that the Proposed Transaction will not give rise to any non-coordinated effects for the following reasons:
- due to the nature of the flat-backed / fabric printing blankets market being generally homogenous, intermediate and end-user customers largely view all competing brands equally;
- intermediate customers such as distributors carry several other manufacturers' products apart from ContiTech's and the Target Business’s products in their portfolio; and
- end-user customers are also willing to switch to a supplier that can meet their requirements at a lower price. As such, there are no specific brands that are considered the "next best alternative".
The Parties submit that the Proposed Transaction will not give rise to any coordinated effects for the following reasons:
- the market structure does not allow competitors to monitor each other's pricing or have precise knowledge of market prices;
- the Singapore market is very small and it would be difficult and unrealistic for the Parties to lower prices in order to win any additional market shares in Singapore given the number of competitors and the current capacity utilisation in the industry; and
- customers in the flat-backed / fabric printing blankets market are able to switch between different suppliers easily and quickly, as switching costs are low and the products can be easily substituted by other manufacturers' products.
According to the Parties, there are no existing or potential vertical relationships between the Parties.