SM, Goldilocks call off acquisition deal

The country’s largest conglomerate SM Investments Corp. has given up its bid to take over leading bakeshop chain Goldilocks Bakehop Inc. amid stringent conditions set by antitrust agency Philippine Competition Commission (PCC).

“SM and Goldilocks have jointly agreed not to pursue the transaction given changes in the general business environment,” SM said in a cryptic press statement yesterday.

The acquisition of Goldilocks would have been SM’s ticket to the restaurant business.

Owned by the Yee family, Goldilocks has more than 600 branches here and abroad (at least 12 are in the United States, two in Canada and six in Thailand.

“This was a mutual decision, which was jointly agreed upon after a friendly and productive dialogue. Since we first began talks with SM, so much has happened in the marketplace, and many changes have occurred in our respective business environments. This caused us to re-evaluate our position, and to arrive at a decision that we feel is best for both companies,” Goldilocks president Richard Yee said in a statement.

Yee thanked the SM group for the intent to partner with his firm. “This is yet another validation of our efforts to strengthen our leadership position.”

While the Sy family-led SM only cited “changes” in the business backdrop in its brief statement, industry sources said the stringent conditions set by the country’s antitrust agency Philippine Competition Commission became the major deal-breaker.

PCC commissioner Stella Alabastro Quimbo said they received a letter from the parties involved, notifying the agency that they would no longer push through with the deal.
“What they told us in the letter was that the circumstances surrounding Goldilocks changed so they had to reasses the commercial aspects of the transactions,” Quimbo said.

The issue was that the investment in Goldilocks would make SM, as landlord, competitor to other fast-food tenants.

The PCC cleared at end-2017 SM Retail’s acquisition of Goldilocks but SM was asked to commit to certain measures such as an “information firewall.” This means SM mall operator would not give Goldilocks access to competing mall tenants’ information—including sales data captured by the POS system of SM tenants, whether referring to consolidated sales, product category level or stock keeping unit level information, such as prices or quantities sold.

Maintaining this “information firewall,” the PCC had said, was meant to ensure that SM Retail/Goldilocks would not be able to use sales data or information of its competitors to its advantage.

The SM Group was also obliged to comply with its commitment and submit reports to the PCC. Over a period of five years, the parties would have been monitored periodically by a team of experts from PCC. Monitoring would have included random inspections.

The PCC had cited risks that discrimination or unfair treatment might arise in the form of arbitrarily assigning competitor tenants to disadvantageous locations or unfavorable lease terms, thereby amounting to partial foreclosure. It can also come in the form of giving less favorable lease terms or completely refuse them lease space in the mall, which amounts to total foreclosure, PCC Chair Arsenio Balisacan had said.

Based on the 2015 financial statement filed by Goldilocks, net sales amounted to P7.86 billion compared to P6.85 billion in the previous year. Net profit attributable to equity holders of parent firm stood at P225.07 million compared to a restated net profit of P947,267 in 2014. The fast-food chain had P2.89 billion in total assets as of 2015.