26 July 2018
The Competition and Consumer Commission of Singapore (“CCCS”) has cleared a proposed acquisition (“Proposed Transaction”) which involved two SGX listed companies in the steel industry. The Proposed Transaction would see the acquiror company acquiring sole control of the target company (collectively, “parties”) and is structured as a pre-conditional general offer by the acquiror company to acquire all of the issued share capital, and accordingly all of the business, of the target company.
CCCS had announced the clearance decision in April 2018 when it concluded that the Proposed Transaction, if carried into effect, would not lead to a substantial lessening of competition within the relevant markets in Singapore. The clearance decision was issued after an extended Phase 1 review following a notification for decision from the acquiror company in February 2018. The Phase 1 review for the matter was extended, with the parties’ consent, beyond 30 business days to allow CCCS sufficient time o assess the Proposed Transaction.
In June 2018, CCCS made the Grounds of Decision publicly available on its website www.cccs.gov.sg.
The Allen & Gledhill Competition & Antitrust practice represented the acquiror company in securing the unconditional clearance.
The parties involved in the Proposed Transaction overlap in the sales of:
- Rebars: 12-metre long reinforcing steel bars in standard bundles;
- Cut & Bend: Reinforcing steel bars cut and/or bent to customer requirements;
- Mesh: Steel wire mesh; and
- Prefab: Factory prefabricated reinforcing steel components for use in the construction of reinforced concrete structures,
(collectively, “Overlapping Products”).
For the purpose of assessing the Proposed Transaction, CCCS’ view was that the relevant markets were those for the processing and distribution of: (i) Rebars and Cut & Bend; (ii) Mesh; and (iii) Prefab, in Singapore.
Factors considered in reaching the clearance decision
In reaching the clearance decision, CCCS took the following factors into consideration:
- There was another more significant competitor to the acquiror company in the industry which was able to exercise materially sufficient competitive constraint on the parties.
- Barriers to entry for new firms to enter the markets for the supply of the Overlapping Products, in particular Mesh, were high primarily due to the large capital overlay required, though firms with existing presence in related markets (e.g. steel stockists) might find that these barriers were surmountable. While the majority of customers were of the view that it was not feasible to import the Overlapping Products from Malaysia, some competitors had the practice of importing some of the Overlapping Products from Malaysia for resale to customers in Singapore.
- In the current market conditions, the production capacity for the Overlapping Products, in particular for Mesh, sufficiently exceeds the demand. Competitors in the market are able to react to increases in demand by simply increasing their capacity utilisation levels to raise production volumes.
- As competition in the industry is not based purely on price, but also on other factors, such as quality of products and delivery times, coordinated effects are assessed to be unlikely to arise in the relevant markets due, in and of itself, to the Proposed Transaction.
The following materials are available on the CCCS website www.cccs.gov.sg: