Feedback sought on BreadTalk's planned acquisition of Food Junction
Fear is the proposed merger with Food Junction could lessen competition
The Competition and Consumer Commission of Singapore is inviting public feedback on BreadTalk Group's proposed $80 million acquisition of Food Junction Management.
This comes after BreadTalk's subsidiary Topwin Investment Holding, which has entered into a sale and purchase agreement for the acquisition, asked for a decision on whether the transaction would infringe the Competition Act.
Section 54 of the Act prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore.
Topwin submits that it primarily overlaps with food court operator Food Junction in two markets.
They involve the sale of drinks, fruits, snacks, desserts and hot meals to consumers in food court premises, as well as the rental of stalls to food vendors.
Topwin also said the proposed transaction will not result in a substantial reduction of competition in these markets here, in part because both are "highly competitive" and the merged entity will continue to be constrained by a large number of competitors.
Customers in both markets can easily switch across multiple alternatives, it added.
Food vendor tenants can also move to other coffee shop and food court premises if they find that rental terms offered are not competitive.
Topwin said the barriers to entry and expansion are low, as "it is not unduly restrictive or onerous for food vendors and food court operators to obtain the necessary operating licences from the Government".
NOT OVERLY COSTLY
It is also not overly costly for food vendors to set up new food stalls in food courts, coffee shops and hawker centres, it added.
Topwin also submits that the merged entity "faces strong countervailing constraints by landlords, who may choose not to renew the master lessor if the rental rates imposed on food vendor tenants are too high, which translates to fewer food vendors and consequently lower foot traffic to the landlords' premises".
Additionally, the transaction will allow the merged entity to enjoy cost efficiencies by streamlining Food Junction's head office operations with BreadTalk's centralised shared services team - for support functions such as finance and human resources, according to Topwin.
The food stalls directly operated by Food Junction and Food Republic can achieve "significant cost reductions through joint procurement" as well.
The commission is inviting public feedback until Sept 24.