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(i) the names of the merger parties;
BRC Asia Limited (“BRC”) and Lee Metal Group Ltd (“Lee Metal”) (collectively, the “Parties”).
(ii) a description of the transaction;
This sole notification by BRC relates to the pre-conditional general offer by BRC to acquire all of the issued share capital of Lee Metal (the “Proposed Transaction”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
The principal activities of BRC are the prefabrication of steel reinforcement for use in concrete, trading of steel reinforcing bars, and manufacturing and sale of wire mesh fences.
Lee Metal’s primary business activities are steel merchandising and fabrication of reinforcement steel products for the construction and building industry.
(iv) a description of the overlapping goods or services, including brand names;
The Parties overlap in the supply of:
(1) 12-metre reinforcing steel bars: 12-metre long reinforcing steel bars in standard bundles;
(2) cut and bend reinforcing bars: reinforcing steel bars cut and/or bent to requirement at factories;
(3) mesh: steel wire mesh; and
(4) prefabricated reinforcing steel components: factory prefabricated reinforcing steel components for use in the construction of reinforced structures,
collectively referred to as the “Overlapping Products”.
(v) a description of substitute goods or services;
All of the Overlapping Products can be entirely substituted by contractors or sub-contractors, or precast manufacturers, through processing reinforcing steel bars at the location of use, instead of procuring the Overlapping Products from fabricators such as the Parties. Customers can also use alternative materials, such as structural steel and mass engineered timber, as substitutes for the Overlapping Products.
(vi) The applicant's views on:
a. definition of the relevant market(s);
BRC submits that the relevant market for the Proposed Transaction is the regional processing and distribution of reinforcing steel products in Singapore and Malaysia.
b. the way in which competition functions in this market;
BRC submits that the relevant market is highly competitive, in view of the excess capacity in the market and the multitude of competitors of varying sizes.
c. barriers to entry and countervailing buyer power; and
Barriers to entry
BRC submits that barriers to entry and expansion are not restrictive. There are no planning restraints, technology, R&D requirements, regulatory barriers, import restrictions (tariffs, licensing, or quarantine), IP rights, availability of raw materials, length of contracts that would affect entry.
Further, there is no brand-stickiness. Customers are not restricted by perceptions of differences in quality when deciding to switch between competing suppliers. Incumbent companies will not have advantages over new entrants because of their established position, and a new entrant would be able to compete in the market in Singapore through price competition.
Countervailing buyer power
BRC submits that there is strong countervailing buyer power in the relevant market. Buyers can freely import and process their own reinforcing steel at their construction sites using steel sub-contractors and/or their own steel workers. Subject to contractual commitments, buyers can also easily change suppliers, by switching to one of the other existing reinforcing steel players in Singapore or Malaysia.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
Non-coordinated effects
BRC submits that non-coordinated effects will not arise as a result of the Proposed Transaction for the following reasons:
(1) the market is highly competitive, in view of the excess capacity;
(2) customers perceive that the Overlapping Products can be entirely substituted by contractors or sub-contractors, or precast manufacturers, through processing reinforcing steel bars at the location of use, instead of procuring the Overlapping Products from fabricators such as the Parties. Customers can also use alternative materials, such as structural steel and mass engineered timber, as substitutes for the Overlapping Products;
(3) reinforcing steel products may be customised by any supplier based on customers’ specifications and needs; and
(4) customers are not restricted by perceptions of differences in quality when deciding to switch between competing suppliers.
Coordinated effects
The characteristics of the relevant market preclude the possibility of anti-competitive coordinated effects, as:
(1) there are numerous competitors of varying sizes such that participating firms are unlikely to be able to align themselves on terms of coordination, and difficulty to monitor compliance;
(2) the high level of excess capacity and incentives by market players to ramp up to absorb demand from switching customers; and
(3) potential for new entry which creates disruptive effects and reduces sustainability of any coordinated behaviour.
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