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(i) The names of the merger parties:
- Samwoh Premix Pte. Ltd. (“SWPPL”); and
- Ley Choon Constructions and Engineering Pte. Ltd. (“LCCE”)
(ii) A description of the transaction:
This sole notification by Samwoh relates to the proposed acquisition (the “Proposed Transaction”) by SWPPL of the following property and assets from LCCE:
- the property comprised in Lot 3465C of Mukim 11 (also known as Private Lot A1276500) together with the building erected known as 55 Kranji Crescent, Singapore 728662 (the “Property”); and
- the asphalt premix manufacturing plant together with all plant and equipment in connection therewith (the “Plant and Equipment”) situated at the Property, as set out in Schedule 1 of the Agreement Relating to the Sale and Purchase of 55 Kranji Crescent Singapore 728662 entered into between LCCE and SWPPL on 19 May 2016 (the “SPA”).
(collectively, the “Disposal Assets”).
(iii) A description of the business activities of the merger parties worldwide and in Singapore:
SWPPL, Samwoh and the Samwoh group of companies
The Samwoh group of companies is involved in the following areas of business in Singapore:
- building materials: supply and lay of asphalt premix; ready-mixed concrete; and quarrying and supply of building materials;
- construction: civil engineering and infrastructure;
- special products and services: explosives and controlled blasting systems; precast concrete components; specialised pavement products; and logistics and machinery rentals;
- recycling: recycling of construction waste; and
- Research &Development (“R & D”): R&D centre; and consultancy services.
The Samwoh group of companies is also involved to some extent in the quarrying of building materials in Indonesia, and the provision of consultancy services and road condition surveys outside of Singapore.
Disposal Assets and the Ley Choon group of companies
The Plant and Equipment, which commenced production of asphalt premix in 2003, was the first asphalt premix manufacturing plant of the Ley Choon group of companies.
The Ley Choon group of companies also operates a second asphalt premix manufacturing plant (the “LC Second Plant”) which does not form part of the Disposal Assets, and after the Proposed Transaction, the Ley Choon group of companies will continue to manufacture asphalt premix for supply in Singapore through the LC Second Plant.
More broadly, the Ley Choon group of companies is involved in the following areas of business in Singapore:
- pipes and roads segment consisting of underground utilities infrastructure construction and maintenance, sewer pipeline rehabilitation, and road and airfield construction and maintenance; and
- construction materials segment comprising of asphalt premix production and construction waste recycling.
(iv) A description of the overlapping goods or services, including brand names:
SWPPL (through the Samwoh group of companies) and the Disposal Assets overlap only in the production of asphalt premix in Singapore.
(v) A description of substitute goods or services:
The predominant material used as a surfacing for roads and pavements in Singapore is asphalt premix, with recycled asphalt premix also increasingly used since 2010.
(vi) The applicant’s views on:
a. the definition of the relevant market(s);
b. the way in which competition functions in this market;
c. barriers to entry and countervailing buyer power; and
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
Samwoh submits that the relevant market for the purposes of this notification is the market for the production of all asphalt premixes (including recycled asphalt premix) in Singapore.
As a starting point, Samwoh submits that the Proposed Transaction does not result in any significant structural change to the relevant market for the production of asphalt premix in Singapore, if at all. In particular:
- there is no change to the number of competitors in the production of asphalt premix in Singapore;
- the Ley Choon group of companies, as well as the other current manufacturers of asphalt premix in Singapore, will continue to competitively constrain Samwoh in the production of asphalt premix post-Proposed Transaction. There will be no substantial change in Ley Choon’s continued ability to compete against the Samwoh group of companies after the Proposed Transaction; and
- the competitive structure of the production of asphalt premix in Singapore has clearly shifted, and is in fact more competitive, with the entry of United E & P Pte. Ltd (“UE&P”) into the production of asphalt premix in Singapore.
Non-coordinated effects
Samwoh submits that non-coordinated effects will also not arise in the production of asphalt premix in Singapore as a result of the Proposed Transaction, for the following reasons:
- Samwoh, whether before or after the Proposed Transaction, does not have any significant market power in the production of asphalt premix in Singapore, due to the strong competitive constraints;
- the multitude of viable alternative suppliers in the production of asphalt premix, including Ley Choon which will retain its activities in the production of asphalt premix in Singapore through the LC Second Plant;
- the ability of customers of asphalt premix to switch easily to other suppliers of asphalt premix;
- the presence of large end and intermediate customers who are able to exercise strong countervailing buyer power and impose downward pressure on pricing terms;
- the presence of large customers who are able to, or can credibly threaten to, internalise demand by commencing their own asphalt premix manufacturing plant;
- the low barriers to entry for new entrants, or to expansion for existing competitors in respect of their capacity and customer base; and
- the ability and capacity of competitors to quickly and readily absorb the demand of any marginal customers switching away from Samwoh as a competitive constraint on pricing.
Coordinated effects
The characteristics of the relevant market preclude the possibility of anti-competitive coordinated effects, as:
- there are low barriers to entry and expansion in the production of asphalt premix in Singapore and any coordinated behaviour may be easily disrupted by an opportunistic new entrant to undercut prices;
- the incentives of competitors would be to expand output to utilise the capacity, instead of maintaining any coordinated behaviour; and
- the presence of large end- and intermediate customers and the significant countervailing buyer power which may be exercised by such customers in response to any observed coordinated behaviour.
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