THE Australian Competition and Consumer Commission (ACCC) will not oppose the proposed acquisition of rural services company Ruralco (ASX:RHL) by Nutrien, which operates in Australia through its wholly owned subsidiary, Landmark.
The ACCC’s decision is subject to an undertaking requiring Nutrien to divest three rural merchandise stores located in Broome (WA), Alice Springs (NT) and Hughenden (Qld), to a purchaser approved by the ACCC.
The decision follows the ACCC commencing a review of the proposed acquisition on 22 March 2019 and raising concerns about the acquisition in June. It sought submissions from interested parties about the proposed undertaking.
ACCC deputy chair Mick Keogh said the ACCC examined the acquisition very closely as it combined two of three major retail chains in the rural merchandise market.
Combined, Landmark and Ruralco will own 20 to 25 per cent of rural merchandise stores, and will provide wholesale supply to many other sites.
“Ultimately, we decided that the transaction was not likely to substantially lessen competition, as rival rural merchandise retailers and wholesalers will continue to provide strong competition,” Mr Keogh said.
“The independent sector in rural merchandise is strong, and we considered that it is likely to remain strong, due to the close relationship that independent store owners can build with their local farmer customers.
“Customer relationships and service are more important than branding to many customers in this industry, and this provides greater scope for independent retailers to compete than is the case in some other retail industries.
The ACCC also investigated competition impacts that may arise in the provision of wool broking, livestock agency, insurance, finance, real estate and water broking; as well as potential issues that may arise from vertical integration between the retailing and wholesaling of rural merchandise.
“Ultimately we decided that there would not be a substantial lessening of competition in any relevant market,” Mr Keogh said.
The ACCC also considered carefully the issue of Landmark’s bargaining power with manufacturer/suppliers.
It concluded that while Landmark will be in a strong bargaining position, suppliers still generally have other channels through which to distribute their goods, and any increase in buyer power is not likely to be substantial.
The ACCC will issue a public competition assessment in due course. Further information is available on the ACCC’s public register at ‘Landmark – proposed acquisition of Ruralco’.
The ACCC is also separately reviewing Elders’ proposed acquisition of AIRR and expects to announce the finding of that review on 12 September 2019.
Nutrien president and chief executive officer Chuck Magro said the company was very pleased with today’s decision.
“We continue to believe the combination of our Landmark operations with Ruralco in Australia will provide significant strategic and financial benefits for all stakeholders,” he said.
“This combination is good for Australian farmers, bringing a greater choice of products, services and technologies to Ruralco’s customer base and positioning Australian farmers to succeed in an increasingly competitive global marketplace.
“The transaction is expected to deliver excellent value for both Ruralco and Nutrien shareholders.”
The head of Landmark, Rob Clayton, said the ACCC decision was one step closer to a combined Ruralco and Landmark, which we believed would create enormous value for Australian farmers.
“By leveraging the global reach of Nutrien, our people – who live and work in rural and regional Australia – will deliver enhanced solutions and services, products and innovation to Australian growers,” he said.
With regulatory approval received from the ACCC, the transaction now requires approval from the Australian Foreign Investment Review Board (FIRB). Upon securing the necessary approvals from the FIRB, as well as Ruralco shareholders, the transaction is anticipated to be completed on September 30, 2019.
Sources: ACCC, Nutrien