The Fair Trade Commission (FTC) yesterday rejected Cash Box KTV’s (錢櫃) application to acquire Holiday Entertainment Co (好樂迪) citing concerns over market competition and triggering price hikes.
It was the fourth time since 2007 that the commission has rejected an application by the two companies to combine operations.
Cash Box in February said that it planned to acquire Holiday Entertainment at NT$67.7 per share.
The companies were to continue operating independently after gaining regulatory approval for a merger, it said at the time.
“Although a merger could bring economic benefits to the two companies, we see more disadvantages than benefits from the deal, due to damage to market competition,” FTC Deputy Chairman Perng Shaw-jiin (彭紹瑾) said by telephone.
A combination would “significantly reduce” competition in the nation’s karaoke market, as Cash Box and Holiday are the two biggest companies in the sector with a combined market share of 45 percent, Perng said.
While the companies have promised not to raise prices or reduce services within five years of a merger, a chance of prices hikes due to less competition still exists, he said, adding that a deal would fail to create economic benefits in the long term.
“Once they are combined, it would be difficult for consumers or their competitors to stop them from raising prices,” Perng said.
The commission said it collected opinions from record labels, Karaoke products agents, intellectual property right groups and consumer protection advocates, who all voiced concerns about possible harm to market competition from a merger.
Cash Box and Holiday Entertainment in separate filings yesterdaywith the Taiwan Stock Exchange said they would review the reasons for the rejection once they receive written documents from the commission and decide how to address the matter.
Cash Box operated 16 outlets nationwide as of last month, compared with Holiday Entertainment’s 52.
Cash Box owns 26.06 percent of Holiday Entertainment shares, while Holiday Entertainment possesses a 32.39 stake in Cash Box, according to the commission.
In the first half of this year, Cash Box’s net income fell 7.98 percent annually to NT$636.09 million (US$20.28 million), with earnings per share (EPS) of NT$4.66.
Holiday Entertainment saw net income drop 1.44 percent to NT$480.9 million over the period, with EPS of NT$3.26.
Cash Box shares yesterday closed down 11.36 percent at NT$174.51 in Taipei trading, while Holiday Entertainment shares edged up 0.15 percent to NT$66.7.
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