Proposed Acquisition by Parkway of RadLink

Notifying Parties

Parkway Holdings Ltd

Fortis Healthcare Singapore Pte. Limited

Notifying Date

15 October 2014

Summary of Transaction

(i)              the names of the merger parties;

>    Parkway Holdings Ltd (“Parkway”)

>    RadLink-Asia Pte. Ltd. (“RadLink”)

(ii)              a description of the transaction;

Parkway is acquiring, through its wholly-owned subsidiary, Medi-Rad Associates Ltd (‘‘Medi-Rad’’), the entire equity stake in RadLink together with its subsidiaries from Fortis Healthcare Singapore Pte. Limited (‘‘Fortis’’) (the ‘‘Proposed Transaction’’).

(iii)             a description of the business activities of the merger parties worldwide and in Singapore;

RadLink was founded in 2000 as a radio diagnostic imaging business. RadLink does not operate any businesses outside Singapore. Its ultimate parent, Fortis Healthcare Limited, is a leading pan Asia-Pacific integrated healthcare delivery provider and operates its healthcare delivery services in India, Singapore, Dubai, Mauritius and Sri Lanka. RadLink operates imaging centres, a small chain of general practitioner (GP) clinics and a Cyclotron machine in Singapore.

Parkway’s business is focused on the Singapore market, apart from a 21 bed cardiac centre in Brunei, Gleneagles JPMC Sdn Bhd, which is through a joint venture with the government of Brunei Darussalam, as well as a 30% shareholding in Parkway Group Healthcare. Its ultimate parent, IHH Healthcare Berhad Group (‘‘IHH’’), has a presence in several countries including Singapore, Malaysia, Turkey, China and India. Parkway has a network of hospitals, primary care clinics, radiology and imaging service facilities and laboratories in Singapore. Parkway is a minority shareholder in Positron Tracers Pte Ltd which owns a Cyclotron machine in Singapore.

(iv)             a description of the overlapping goods or services, including brand names;

The overlapping goods and services in the Proposed Transaction are:

a)      radiology and imaging services;

b)    primary care clinics and services;and

c)     supply of radiopharmaceuticals.

(v)              A description of substitute goods or services;

The Applicants submit that in general, there is no substitute for medical treatment as a whole. However, within the general healthcare services model, patients may choose to seek treatment with either a public or a private healthcare services provider.

In addition:

a)     for radiology and imaging services, each imaging service (e.g. x-ray, PET, CT scans etc) has its own advantages and disadvantages, and there may be substitutability between certain services to some extent depending on the doctor’s or the patient’s decision; and

b)    for supply of radiopharmaceuticals, there may be some substitutability between the specific types of radiopharmaceuticals. However, each tracer is developed for detecting a specific type of cancer.

(vi)             The applicant’s views on:

a.             definition of the relevant market(s);

b.            the way in which competition functions in this market;

c.             barriers to entry and countervailing buyer power; and

d.            the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

The Applicants submit that the relevant markets are:

a)     the provision of radiology services and imaging services in South and South East Asia, or in the alternative and at the lowest, Singapore;

b)    the provision of primary care clinics and services in Singapore; and

c)     the supply of radiopharmaceuticals in Singapore.

Radiology and imaging services

The Applicants submit that the relevant market for radiology and imaging services covers both the private and public sector. Competition takes place on, amongst others, price and types of imaging services provided. Parkway is of the view that although the services are provided largely to Singapore customers, a significant proportion of the services are provided to medical tourists. The Applicants submit that the barriers to entry in the relevant market are not significant.

The Applicants submit that the Proposed Transaction will not result in a substantial lessening of competition in any market in Singapore because of:

a)     the increment in shares from the Proposed Transaction is not significant and the share of the merged entity in the relevant market remain small overall;

b)    strong countervailing buyer power due to the low switching costs for buyers of radiology and imaging services;

c)     low barriers to entry; and

d)    the large number of existing competitors in the relevant market.

Primary care clinics and services

The Applicants submit that the relevant market for primary care clinics and services covers both the private and the public sector. The private sector is fragmented with a large number of general practitioners (GPs) in private practice and a few primary care groups. The Applicants submit that as Parkway has a very small share of the relevant market for primary care services, Parkway has no market power and the increment arising from the Proposed Transaction is negligible. The Applicants submit that the barriers to entry in the market are not significant. The merged entity is constrained by significant buyer power because of low switching costs for buyers in respect of primary care clinics and services.

The Applicants submit that the Proposed Transaction will not result in a substantial lessening of competition in any market in Singapore because:

a)     the increment in shares from the Proposed Transaction is not significant and the shares of the merged entity remain small overall;

b)    strong countervailing buyer power due to the low switching costs for buyers of primary care clinics and services;

c)     low barriers to entry; and

d)    the large number of existing competitors in the relevant market.

Supply of radiopharmaceuticals

The Applicants submit that although there are only 3 Cyclotrons in Singapore, there will be no significant change to the nature of the supply of radiopharmaceuticals arising from the Proposed Transaction, as Parkway has no decisive influence over the Cyclotron owned by Positron Tracers Pte. Ltd. (‘‘PTPL’’).

 The Applicants submit that the Proposed Transaction will not result in a substantial lessening of competition in any market in Singapore because:

a)     the merged entity will not have the ability to control pricing or output decisions of the Cyclotrons, given the short lifespan of radiopharmaceuticals;

b)    there is potential for a third commercial Cyclotron to be established;

c)     the limited product overlaps between the Applicants, in particular the beyond-FDG tracers;

d)    the Cyclotrons are regulated by the Ministry of Health.

Further, given that the incremental shares in the downstream space for radiology and imaging services arising from the merger are negligible, and Parkway will not have decisive influence over PTPL in the upstream space for radiopharmaceuticals, the Proposed Transaction will not result in any substantial lessening of competition.

Status

On 11 March 2015, CCS took a provisional decision to block Parkway Holding's Ltd's proposed acquisition of RadLink-Asia Pte Limited. In its letters to the Applicants, CCS stated that the Proposed Transaction would result in a substantial lessening of competition (“SLC”) in the affected markets and would infringe section 54 of the Competition Act. For more details, please refer to the media release. CCS understands that the anticipated merger has been abandoned as the Sale and Purchase Agreement relating to the Proposed Transaction has lapsed and ceased to be of effect as of 13 March 2015.

 Status date

 13 March 2015