THE bid by farms services giant Elders to complete its $475 million takeover of Delta Agribusiness has hit a roadblock with the Australian Competition and Consumer Commission.
The corporate watchdog has issued a statement of interest (SOI) indicating its serious concerns the deal could skew the market forcing prices up and competition down.
Delta Ag has a network spanning Queensland, New South Wales, Victoria, South Australia and Western Australia.
In Victoria that means the 15 branches of North West Ag, which covers centres such as Ouyen, Swan Hill, Boort and Quambatook.
Even as it announced the deal last November, Elders conceded it would probably have to shed some of its rural supplies stores to get the ACCC green light.
But clearly it has not done enough – yet – to get past the stop sign.
As soon as the deal was announced, farmers were going very public with concerns the merger of two of the industry’s three biggest players was a bad move for them – and competition.
Several key Elders regional staff immediately defected to other businesses, which in north-west Victoria saw McKean McGregor launched as an immediate success story based in Mildura.
ACCC deputy chair Mick Keogh told North West Farmer “competition in the supply of rural merchandise is critical to Australian farmers and our global competitiveness in agricultural products”.
“We have preliminary concerns the proposed acquisition may lead to higher prices or reduced quality in the supply of rural merchandise without an independent Delta competing with Elders following this proposed acquisition,” he added.
“The ACCC is also concerned the proposed acquisition may reduce competition in the retail supply of rural merchandise in various local markets, and at a broader regional, state or national level.
“Elders and Delta, through their networks of stores, are both significant retail suppliers of rural merchandise in Australia.”
Mr Keogh said the ACCC’s preliminary view is the proposed acquisition is likely to substantially lessen competition in the retail supply of rural merchandise in certain local markets in places such as northwest Victoria.
He said the ACCC is continuing to investigate how closely Elders and Delta retail stores compete with each other, and the extent to which larger retail chains and smaller retailers (or smaller chains) are likely to compete with Elders if the proposed acquisition were to proceed.
“A key issue we are testing is the extent to which having a chain of retail stores assists Delta to compete with Elders more effectively than smaller retailers, both in individual local markets, and across a broader geographic area,” Mr Keogh added.
The closing date for submissions to the ACCC’s statement of interest was last month, and its findings are expected to be released on August 21.
Elders said the SOI is not a final decision, and instead provides a preliminary view on potential competition issues which require further investigation by the ACCC.
The company said the ACCC was seeking further information and industry feedback particularly in relation to certain local markets.
The ACCC is also seeking feedback on other areas.
Elders and Delta will continue to engage constructively with the ACCC to address the issues expressed in the SOI.
Elders managing director Mark Allson told North West Farmer he remains confident the transaction will bring benefits to local agricultural markets through the expansion of price-competitive private label options, increased technical expertise and greater product and service offerings for farmers.
“Elders is assessing the impact of the ACCC’s process on the transaction timetable and will provide a further update as and when required,” Mr Allison said.
“It is our view rural retailing is more competitive than ever and the barriers to entry have never been lower.
“Rural supplies retailers are akin to your local corner shop, where local relationships, knowledge and service are essential to maintain customer support.
“The intent of this acquisition is to strengthen the local agricultural supply in regional communities and back the local stores which serve regional Australia.
“The proposed transaction intends to improve farmer access to expertise by leveraging the strengths of both companies.
“Both Elders and Delta are committed to ensuring our local stores remain competitive, well-resourced, and responsive to the unique needs of their agricultural communities.”
Grain Producers Australia southern director Andrew Weidemann, who farms in the Wimmera, confirmed to media “it backs up what we are saying. They (Elders) would need to divest branches for this to go through”.
Mr Weidemann said GPA had already identified around 30 locations where there would be a significant overlap of Elders and Delta owned outlets.
“When you’ve got competition in agencies in a town, you’re assured of them having enough stock. It’s actually also about security of supply,” he said.
With Nutrien Ag Australia’s largest chain of rural supplies outlets – more than 380 sites – the merger of Elders and Delta would turn a top three market into a top two, creating a potential duopoly.
Despite growing concerns, Elders late last month declared a “new era of stability and growth for Elders on the back of improved first half earnings”.
The company’s half year results for the six months to March 31 showed a $64.3 million underlying earnings before interest and tax, up 67 per cent from the previous year’s first half.
Mr Allison said he “is overwhelmingly positive about the state of the agriculture industry and the outlook for Elders”.
“It seems to me that we are on the cusp of a new era of stability and prosperity for agriculture, and for Elders,” he added.
