THE Australian Competition and Consumer Commission (ACCC) will not oppose the proposed acquisition of rural wholesale buying group Australian Independent Rural Retailers (AIRR) by Elders (ASX: ELD).
Elders is an important competitor in rural retailing, but currently has minimal operations in wholesaling to independent rural retail stores.
The company has about 450 points of presence across Australia, predominantly company-owned, JV and real estate stores as well as financial services franchised stores. Elders’ rural merchandise retail network comprises approximately 216 of these 450 sites.
AIRR is an important wholesaler to independent rural stores, but has minimal assets of its own in rural retailing.
It is predominantly a buying group, which wholesales rural merchandise. It also owns six rural merchandise retail stores in Victoria at Shepparton, Cranbourne, Stawell, Ararat, Camperdown and Violet Town.
AIRR supplies rural merchandise to nearly 2000 independent retail stores across the country on a wholesale basis.
“The ACCC examined the proposed transaction closely, because it could give rise to vertical integration concerns. In particular, the ACCC assessed the risk that independent stores would be discriminated against by Elders in a way that harms competition,” ACCC deputy chair Mick Keogh said.
“We tested these vertical issues closely with industry participants and independent retailers. Market feedback suggested that most independent retailers consider they have sufficient alternative supply options if Elders attempted to discriminate against them.
“It also appears that existing or potential new buying groups or wholesalers could expand in response to any future change in AIRR’s offering.”
The ACCC also considered whether the transaction could result in reduced competition in towns where Elders and independent stores supplied by AIRR are in close proximity to each other.
“The vast majority of locations impacted have other stores competing with Elders and the AIRR-supplied stores, which are likely to prevent a softening of competition,” Mr Keogh said.
“In those cases where there were limited alternatives to the Elders and independent AIRR-supplied store, market feedback indicated that there were alternative wholesale supply options for the relevant independent store.”
The ACCC also considered the issue of Elders’ bargaining power with manufacturers or importers of rural merchandise.
The ACCC concluded that while Elders would be in a strong bargaining position, suppliers still generally had other channels through which to distribute their goods, and any increase in buyer power was not likely to be substantial.
“Ultimately we decided that there would not be a substantial lessening of competition in any relevant market,” Mr Keogh said.
“There is significant consolidation in the rural retail sector, given the Elders proposal and the Landmark-Ruralco deal. We will look very closely at any further consolidation.”
In a brief statement this afternoon, Elders’ chief executive Mark Allison said Elders welcomed the decision by the ACCC.
“It means both businesses can get on with delivering the transaction,” he said.
“Like Elders, AIRR is a business with a track record of driving Australian agricultural success. It has grown consistently since its establishment in 2006. It’s a track record we wish to continue and support.”
“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. We look forward to further enhancing AIRR’s offering to its diverse customer base and continuing to grow the business together,” Mr Allison said.
Source: ACCC, Elders
Further information is available at Elders Ltd proposed acquisition of AIRR Holdings Ltd