Views sought: BreadTalk's acquisition of Food Junction

The Food Junction foodcourt at Bugis Junction. BreadTalk subsidiary Topwin Investment Holding submits that it primarily overlaps with foodcourt operator Food Junction in two markets, but says the proposed transaction will not result in a substantial
The Food Junction foodcourt at Bugis Junction. BreadTalk subsidiary Topwin Investment Holding submits that it primarily overlaps with foodcourt operator Food Junction in two markets, but says the proposed transaction will not result in a substantial reduction of competition in these markets here. ST PHOTO: LIM YAOHUI

Competition watchdog inviting public feedback on proposed $80m purchase

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 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 foodcourt operator Food Junction in two markets.

They involve the sale of drinks, fruits, snacks, desserts and hot meals to consumers in foodcourt 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 can easily switch across multiple alternatives for hot meals, it added.

Food vendor tenants can also move to other coffee shop and foodcourt premises if they find that the 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 foodcourt operators to obtain the necessary operating licences from the Government".

It is also not overly costly for food vendors to set up new stalls in foodcourts, 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".

Also, 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.

A version of this article appeared in the print edition of The Straits Times on September 12, 2019, with the headline 'Views sought: BreadTalk's acquisition of Food Junction'. Print Edition | Subscribe