SINGAPORE: The Competition Commission of Singapore (CCS) has blocked IHH Healthcare Bhd’s proposed acquisition of RadLink-Asia as it would reduce competition.
According to a statement the CCS said the proposed transaction would result in “a substantial lessening of competition” (SLC) in affected markets.
Medi-Rad Associates is an indirect unit of IHH, which is also the parent company of Parkway, the Singapore unit for the organisation. RadLink’s parent company is Fortis Healthcare Limited.
Last Friday, IHH Healthcare announced the decision to scrap the S$137mil (RM346.53mil) deal was due to the non-satisfaction of certain conditions in the sales and purchase agreement.
It said the agreement between its unit Medi-Rad Associates Ltd and Fortis Healthcare Singapore Pte. Ltd to acquire Radlink-Asia had ceased.
Radlink is an investment holding company and its core activity is to provide healthcare services including outpatient diagnostic and molecular imaging services in Singapore.
According to the CCS statement, it had on March 11, 2015, issued letters to Parkway Holdings Ltd and Fortis Healthcare Singapore Pte. informing the parties that CCS had taken a provisional decision to block the proposed acquisition of RadLink-Asia Pte Limited and its subsidiaries by Medi-Rad Associates Ltd, an indirect wholly-owned subsidiary of IHH Healthcare Bhd.
In the letters, CCS stated the proposed transaction would result in a substantial lessening of competition in the affected markets and would infringe section 54 of the Competition Act (Cap. 50B).
On March 13, 2015, Fortis Healthcare Limited announced on the National Stock Exchange of India Ltd. that its subsidiary, Fortis Singapore, had received a “decision” from CCS that if the proposed transaction is completed as contemplated, the “combination may result in lessening of competition in the relevant market in Singapore”.
Consequently, Fortis will “continue to explore alternative strategic opportunities related to RadLink”.
On the same day, IHH Healthcare announced on Bursa Malaysia and the Singapore Exchange that the Sale and purchase agreement entered into between Medi-Rad Associates Ltd and Fortis Singapore in relation to the proposed transaction had lapsed and ceased to be of effect.
CCS said post-merger, Parkway would become the only commercial supplier of radiopharmaceuticals in Singapore, through its 33% shareholding of Positron Tracers Pte Ltd (PTPL) and the acquisition of 100% of RadLink.
CCS’s market inquiries indicated that no potential new radiopharmaceutical supplier would enter the market in the next two to three years to compete with the merged entity.
In the provision of radiology and imaging services for private outpatients in Singapore, evidence suggests that Parkway and RadLink are each other’s closest competitors pre-merger.
In addition, CCS notes that post-merger, the merged entity would have very substantial market share.
Evidence also suggests that entry barriers are moderate to high, and the bargaining power of customers is weak.
An SLC is also likely to arise from the vertical integration of the parties’ operations between the supply of radiopharmaceuticals and provision of radiology and imaging services, as per the figure below:
CCS’s market inquiries indicated that the merged entity would be able to restrict competition in the market for radiology and imaging services by controlling the supply, the prices and/or the range of radiopharmaceuticals available to its downstream competitors.
”For the reasons above and based on the information available, CCS provisionally concluded that the proposed transaction, if carried into effect, would infringe the section 54 prohibition,” it said.
