(i) the names of the merger parties;
Acquiror: Ridgeback Acquisition LLC ("Acquiror"), a wholly owned subsidiary of Mars, Inc. ("Mars, Inc")
Seller: The Procter & Gamble Company ("Seller")
Target: Seller's pet care business (please see (ii) below for more details)
(ii) a description of the transaction;
This notification relates to the proposed acquisition by the Acquiror, a wholly owned subsidiary of Mars, Inc, of the Seller's pet care business – which consists of the Seller's business of sourcing, manufacturing, producing, marketing, selling, distributing and developing pet-nutrition products in major markets, including dry foods, wet foods and treats, for dogs and cats – in, certain countries[1], including Singapore (the "Transaction").
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
The Acquiror is a holding company with no operational activities itself and was created for the purposes of the Transaction. The Acquiror is a wholly owned subsidiary of Mars, Inc, which is a global privately held company headquartered in McLean, Virginia, USA. Mars operates in more than 74 countries and has six business segments focused on consumer products, namely: (a) pet care, (b) chocolate, (c) mints and candies, (d) food, (e) drinks and (f) health and life sciences.
Mars Petcare is headquartered in Brussels, Belgium and includes leading brands for dogs and cats such as Pedigree, Whiskas, Royal Canin, Cesar, Sheba, Greenies, and Nutro.
The Seller is a global, publicly traded company established in 1837 and headquartered in Cincinnati, Ohio, USA. P&G operates in approximately 80 countries and has four Global Business Units focused on consumer products, namely: (a) Global Fabric and Home Care, (b) Global Beauty, (c) Global Baby, Feminine and Family Care and (d) Global Health and Grooming.
P&G’s pet care business is part of P&G’s Global Health and Grooming segment, and includes brands such as Iams, Eukanuba and Natura.
(iv) a description of the overlapping goods or services, including brand names;
The overlapping goods in the Transaction are:
(a) dry dog food (Mars, Inc's brands in Singapore – Pedigree and Royal Canin, Seller's brands in Singapore – Eukanuba);
(b) dry cat food (Mars, Inc's brands in Singapore – Whiskas and Royal Canin, Seller's brand in Singapore – Iams); and
(c) dog treats (Mars, Inc's brands in Singapore – Pedigree, Seller's brand in Singapore – Iams and Eukanuba).
(v) a description of substitute goods or services;
The applicants submit that there are no alternative substitutes for dry dog food, dry cat food and dog treats, as these products each have different characteristics and application from other types of pet food.
(vi) The applicant’s views on:
a. definition of the relevant market(s);
The applicants submit that the relevant markets are:
(i) dry dog food manufactured globally and supplied in Singapore;
(ii) dry cat food manufactured globally and supplied in Singapore; and
(iii) dog treats manufactured globally and supplied in Singapore.
b. the way in which competition functions in this market;
The applicants submit that pet food suppliers compete on the basis of (a) price and (b) product features e.g. "health benefits" for the pets, palatability of the product, quality of ingredients and suitability for specific needs (e.g. gluten free, food for specific breeds). Further, there is also competition for limited shelf space in the various retailers, which is allocated based on (a) popularity of the product and/or (b) margin provided to the retailer.
c. barriers to entry and countervailing buyer power; and
The applicants submit that the relevant markets are characterised by low barriers to entry and the presence of countervailing buyer power.
Low barriers to entry
The relevant markets have low barriers to entry because:
(i) it is generally not difficult for a potential entrant to secure a distribution arrangement with a local distributor to supply its products;
(ii) end-customers in Singapore do not have a significant degree of brand loyalty in respect of pet food, and tend to be adventurous to try and move between brands according to market trends at any particular point in time;
(iii) regulation of pet food suppliers in Singapore is focused on ensuring food safety, and generally does not present a barrier of entry to pet food suppliers who wish to enter the Singapore market; and
(iv) demand in all the relevant markets has also been growing steadily and the parties submit that such growth in demand will also facilitate new entry to these markets.
Countervailing buyer power
The merged entity will continue to be constrained by significant buyer power exerted by retailers in Singapore because:
(i) there is limited shelf space in both grocery and speciality shops and as such both types of retailers are able to switch between stocking different brands (although this will also depend on the popularity of a particular brand and the margin offered to the retailer); and
(ii) retailers (particularly grocery shops) also often charge suppliers "listing fees" for displaying their product on sale. Retailers also consider: (1) the amount of margin that it earns on a product and (2) the popularity of the product, in determining which products should be allocated shelf space.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The applicants submit that the Transaction will not result in a substantial lessening of competition in any market in Singapore because:
(a) there will still be a number of strong international and local competitors in each of the relevant markets, and potential competitors who may enter the markets, both of which will be able to constrain the merged entity;
(b) there is significant buyer power due to the limited availability of shelf space in the various retailers and the large number of brands available;
(c) the overlapping products of Mars, Inc and the target business in Singapore, which are generally complementary, is only confined to dry dog and cat food, as well as dog treats, and there are no other overlaps in respect of other types of pet food;
(d) the barriers to entry are low; and
(e) the risk of coordinated effects arising from the transaction is low as there is significant product differentiation, countervailing buyer power and low barriers to entry in the relevant markets.
[1] The countries are Ukraine, Republic of South Africa and a number of selected countries in Middle East, Africa and Asia, including Singapore.
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