20 February 2018
A | A
    Print
  

Antitrust & competition feed-image   

Proposed takeover of OldTown by JDE 'not anti- competitive', says CCS

Business Times
31 Jan 2018
Lynette Khoo

The Competition Commission of Singapore (CCS) has cleared the proposed acquisition of OldTown Berhad by global coffeemaker Jacobs Douwe Egberts Holdings Asia NL BV (JDE Asia).

This proposed deal will result in JDE Asia's parent firm JDE having sole control over OldTown.

CCS said on Tuesday that it has concluded that the proposed transaction, if carried into effect, "will not lead to a substantial lessening of competition in the supply of instant coffee mixes and instant milk tea mixes for in-home sales in Singapore".

It will not infringe the prohibition in the Competition Act against anti-competitive mergers, CCS concluded.

In examining the deal's potential impact, CCS said it conducted a public consultation and sought feedback from intermediate customers such as retailers, as well as corporate end-customers and other competing suppliers of instant coffee mixes and instant milk tea mixes in Singapore.

JDE had in December offered to buy the Malaysian coffee company OldTown for RM1.47 billion (S$494 million) or RM3.18 per share in a bid to expand its global coffee empire. It had earlier acquired Singapore-based Super Group, which manufactures and sells more than 160 instant food and beverage products, including instant tea and coffee.

Currently, JDE owns various brands in over 27 countries across Europe, Latin America and Australia. OldTown, which is a publicly listed company on Bursa Malaysia, manufactures coffee and other beverages, sells them to points of distribution globally, and operates retail cafes under the "OldTown White Coffee" brand.

The target company and the acquirer overlap in two key areas - the supply of instant coffee mixes and instant milk tea mixes for in-home sales in Singapore. There is also a marginal overlap between the parties in the supply of instant coffee mixes for out-of-home sales in Singapore.

But in view of the negligible presence of the parties in the supply of instant coffee mixes for out-of-home sales in Singapore, CCS's assessment focused on the markets for the supply of instant coffee mixes and instant milk tea mixes for in-home sales in Singapore.

CCS said that the parties face competition from a number of suppliers in these markets. Barriers to entry and expansion are also relatively low in these markets.

In addition, the larger intermediate customers generally have some negotiation power with the suppliers of instant coffee mixes and instant milk tea mixes, and may be able to exercise bargaining power over the merged entity post-transaction, CCS explained.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.