Elders and big rural merchandise wholesale group, Australian Independent Rural Retailers, have been given the national competition regulator's green light to merge.
The Australian Competition and Consumer Commission has said it would not oppose Elders planned $187 millionacquisition of the 2000-member rural wholesale buying group, even though Elders already ranks as the second biggest player in the farm services sector.
Elders has 216 outlets in its own rural merchandise retail network, plus a further 235 businesses in its portfolio, including real estate and finance offices.
Market feedback suggests most independent retailers consider they have sufficient alternative supply options if Elders attempted to discriminate against them
"The ACCC examined the proposed transaction closely, because it could give rise to vertical integration concerns," said deputy chairman, Mick Keogh.
In particular, the competition watchdog examined the risk independent retail stores may be discriminated against by Elders in a way which harmed competition in the farm supplies marketplace.
"However, market feedback suggests most independent retailers consider they have sufficient alternative supply options if Elders attempted to discriminate against them," he said.
Elders managing director, Mark Allison welcomed the ACCC decision saying both businesses could now "get on with delivering the transaction".
"We look forward to further enhancing AIRR's offering to its diverse customer base and continuing to grow the business together," he said.
The competition regulator acknowledged while publicly-listed Elders was an important competitor in rural retailing, it provided minimal wholesaling services to independent rural retail stores.
At the same time AIRR, although an important wholesaler to independents, had minimal assets of its own in rural retailing.
Mr Keogh noted, however, the recent rush of "significant consolidation" in the rural retail sector.
The Elders takeover has come hot on the heels of market leader Landmark's $469m takeover of the third biggest player, Ruralco, which is set to be formalised by the end of the month.
"We will look very closely at any further consolidation," Mr Keogh said.
Meanwhile, retail and supplier feedback to the ACCC's investigation of AIRR's acquisition suggested any future adverse changes in the buying group's product offering to independent stores resulting from new ownership were likely to prompt existing buying groups or wholesalers to expand, or new groups to establish.
"We tested the Elders-AIRR vertical issues closely with industry participants and independent retailers," he said.
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The ACCC also considered whether the transaction could result in reduced competition in towns where Elders and independent stores supplied by AIRR were in close proximity to each other.
Mr Keogh said the vast majority of locations impacted by the takeover already had other rural supplies stores competing with Elders and the AIRR-supplied businesses, which would be likely to maintain competitive tension in the market.
"In those cases where there were limited alternatives to an Elders and independent AIRR-supplied store, market feedback indicated there were alternative wholesale supply options for the relevant independent store," he said.
Ultimately, we decided there would not be a substantial lessening of competition in any relevant market
The ACCC also explored Elders' bargaining power with manufacturers or importers of rural merchandise.
While Elders would be in a strong bargaining position, it concluded suppliers still generally had other channels through which to distribute goods.
Any increase in buyer power was not likely to be substantial.
"Ultimately, we decided there would not be a substantial lessening of competition in any relevant market," Mr Keogh said.
Although predominantly a buying group wholesaling rural merchandise, the northern Victorian-headquartered AIRR also owns six rural merchandise retail stores in Victoria, at its base in Shepparton, plus Cranbourne, Stawell, Ararat, Camperdown and Violet Town.
Elders' Mr Allison described AIRR is a business with a track record of driving Australian agricultural success which had grown consistently since its establishment in 2006.
"It's a track record we wish to continue and support," he said.
"By preserving continuity of AIRR's key management team and independent identity through a light touch integration, AIRR will continue to deliver the benefits to its independent members which have enabled it to achieve a track record of consistent growth."
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The story ACCC approves $187m Elders buyout of AIRR wholesale group first appeared on Farm Online.