Approval of the combination of Hesong Corporation Ltd. and Song Hsin Corporation Ltd.
Chinese Taipei
Case:
Approval of the combination of Hesong Corporation Ltd. and Song Hsin Corporation Ltd.
Key Words:
approval of combination
Reference:
Fair Trade Commission Decision of September 23, 1998 (359th Commission Meeting); Decision (87) Kung Chieh Tzu No. 657
Industry:
Non-alcoholic Beverage Production Industry (1183)
Relevant Laws:
Article 6(1)(ii) of the Fair Trade Law
Summary:
The combination in this case is qualified as one of the types described in Article 6(1)(ii) of the Fair Trade Law (FTL): "where an enterprise holds or acquires the shares or capital contributions of another enterprise to an extent of representing more than one-third of the total voting shares or the total capital stock of such other enterprise...." In addition, the amount of sales of Hesong Corporation Ltd. (Hesong), one of the enterprises participating in the combination, was about NT$4,720,540,000 for the year of 1996, which reaches the threshold referred to in FTL Article 11(1)(iii): "where the amount of sales in the preceding fiscal year of an enterprise participating in the combination exceeds the amount publicly announced by the central competent authority (i.e. NT$2 billion)." Accordingly, Hesong, the acquirer, should apply to the Fair Trade Commission (this Commission) for approval of the combination.
The facts show that Hesong (the applicant) has acquired 99.968% of the share holdings of Song Hsin Corporation Ltd.' s (formerly Taiwan T'ai Hsin Dyeing and Knitting Co., Ltd.) (TTH) on 11 September 1997. Due to a change of its company name by Taiwan T'ai Hsin to Song Hsin Corporation on October 21, 1997, TTH is no longer in existence. However, the combination occurred before its company name was changed. The applicant, incorporated in April 1925, is historically the most well-known specialized producer of non-alcoholic beverage in this country. Its main business items include the production and distribution of various beverages. Their respective percentages to the total sales are: carbonated beverages 69.5%; juice 10.5%; other beverages 20%. According to the data submitted by the applicant, the growth of the beverage market has been slowing down and stagnant in recent years. The applicant' s market share for the period from 1994 through 1997 respectively was 9.75%, 9.01%, 9.94%, and 9.94% which revealed that the market has been saturated.
TTH was incorporated in February 1962. Its main business items included the production and processing of natural and synthetic fibers. It is therefore positioned in the textile industry as a middle and downstream processor. T' ai Hsin experienced booming sales in the early years. However due to its labor-intensive with low added value and high-polluting characteristics, the entire industry is considered to be a sunset industry without investment value. During the period from 1977 through 1979, the annual amount of sales of the company was about NT$0.3 billion. It suspended the operation of its only production plant at Shen K'eng in October 1994 and the amount of sales for the same year was only NT$1.61 million. The company started to sell its obsolete equipment and clear out its inventories in 1995, leaving land holding its only asset with economic value.
It is understood that the applicant owns six company distribution centers in the Taipei area which account for 20% of its total sales. However, the applicant's business is restrained by factors such as warehousing, business outlets, labor employment, and safe inventories. By this combination, the applicant will acquire TTH' s share holdings and transform the company into a company distribution center in the Taipei area. The applicant could also improve its distribution access in the Taipei area and save its distribution channel from declining by utilizing T' ai Hsin' s land at Shen K'eng after the combination. As the applicant may improve its distribution channel and strengthen its operation by the combination, the combination will be beneficial to the stability of the industry. The combination involves combination between two participating enterprises in two different industries, with Hseong in the beverage industry and T' ai Hsin in the textile processing industry. It will not substantially affect the beverage market. Nor will it create entry barriers for potential competitors. The combination will not result in any substantial restriction on the competition and is accordingly approved.
Summarized by Hu, Chun-Hsien
Supervised by Shih, Chin-Tsun
Appendix:
Hesong Corporation Ltd.' s Uniform Invoice No.: 20651901