Merger of Far Eastern Enterprise Corporation and Geant Dalwant Corporation
Case:
Merger of Far Eastern Enterprise Corporation and Geant Dalwant Corporation
Key Words:
merger
Reference:
Fair Trade Commission Decision of May 24, 2000 (the 446th Commissioners' Meeting), Approval Decision (89) Kung Chieh Tzu No. 506
Industry:
Retail wholesaler (5314)
Relevant Laws:
Summary:
1. Far Eastern Enterprise Corporation (Far Eastern) merged Geant Dalwant Corporation (Geant Dalwant) in an "statutory merger." After their merger, Far Eastern was to be the surviving enterprise while Geant Dalwant would become defunct. Since these circumstances meet the definition of merger set forth in Article 6(1)(i) of the Fair Trade Law (the Law), Far Eastern and Geant Dalwant were obliged file an application for merger with the Fair Trade Commission pursuant to Article 11(1)(iii) of the Law. 2. Impact of the proposed merger on competition According to the 1999 "Economic Statistics" published by the Statistics Department, Ministry of Economic Affairs, total sales in the wholesaler industry for 1999 were NT$29.3 billion. Figures provided by the Ministry's Statistics Office showed that the top 10 retail wholesalers in terms of market share in 1999 were: Carrefour (40.84 percent), the Ta Jun Fa Group (16.71 percent; includes the Ta Jun Fa, Ta Mai Chia, and Ya T'ai subsidiaries), Wan K'e Lung (12.76 percent), Far Eastern (10.05 percent, includes Far Eastern Department Store's market share of 8.58 percent, and Far Eastern Hung Li's market share of 1.47 percent), Fu Yuan (5.34 percent), Hsing Nung (5.26 percent), Ta Le (4.02 percent), Geant Dalwant (2.24 percent), Kao Feng (2.17 percent) ,and Kuang Cheng (0.46 percent). After combining with Geant Dalwant, Far Eastern's market share will be 9.77 percent: an increase in market share of just 1.4 percent. Therefore, the Commission determined that this merger would not have a significant impact on Chinese Taipei's wholesale market and market share, nor would the proposed merger limit competition. 3. Impact on overall economy (1) Geant Dalwant entered the Chinese Taipei wholesaler market in 1996. After three years of operation, Geant Dalwant is still relatively unfamiliar with Chinese Taipei wholesale industry and is continuing its efforts to better understand the Taiwanese consumer market and market conditions. Consequently, Geant Dalwant's overall performance has been poor: as of the end of 1999, the company had lost nearly NT$1.35 billion. Geant Dalwant's has been unable to expand and may pull out of Chinese Taipei causing its several hundred employees to face the threat of unemployment. Geant Dalwant's retail outlets and facilities would also be idled to the detriment of the local economy. Far Eastern, in contrast, has many years of experience operating retail outlets and has a considerable understanding of Chinese Taipei's wholesale industry. Should Far Eastern merge with Geant Dalwant, Geant Dalwant's financial crisis could be resolved and the combined companies would have a positive impact on the overall economy once the two concerns integrated their human and financial resources. The introduction of Geant Dalwant's specialized know-how from overseas would also contribute to the overall positive effect of the merger on Chinese Taipei's economy since it should lead to greater efficiencies and the internationalization and professionalization of Chinese Taipei's wholesale industry. (2) There are currently 103 superstores in Chinese Taipei and more overseas enterprises are expected to enter the Chinese Taipei market and increase competition in the future. Faced with Carrefour, Ta Jun Fa, and Wan Ke Long's combined market share of 70 percent and the competitive edge that the technologies and worldwide logistical support that the overseas partners of these three market leaders provide, Taiwanese retailers need to expand market share aggressively as well as acquire specialized operating techniques if they are to compete in the fiercely competitive wholesaler market. If Far Eastern, which already faces an overly competitive market, does not learn to innovate, it will be faced with an operating crisis thereby preventing its further expansion and conceivably causing its operating scale to shrink. This of course would have an impact on the domestic economy. Therefore, the merger of Far Eastern and Geant Dalwant would lead to a number of positive effects: the acquisition of the French firm's management techniques, the strengthening of Far Eastern's corporate health, and the merger of both firms' experience, expertise, organizational structure, and financial assets. In turn, Far Eastern will be able to tap into a global procurement organization, acquire brand development techniques, rapidly enter the e-commerce market, and effectively implement customer database and supply chain management systems so as to join the mainstream of the retail industry. By combining local know-how with international experience, expanding its operational scale, increasing foreign investment, and creating employment opportunities, this merger would also allow Far Eastern to provide better service to consumers and contribute to Chinese Taipei's overall economic performance. 4. In sum, the benefits of the merger of Far Eastern and Geant Dalwant to the overall economy greatly exceed its impact on competition. The Commission therefore approves the merger pursuant to Article 12 of the Law. Appendix: Far Eastern Enterprise Corporation's Uniform Invoice Number: 05714195 Geant Dalwant Corporation's Uniform Invoice Number: 97166499 Summarized by Ts'ai Yi-ch'un; Supervised by Lin Chin-lang