The Australian Competition and Consumer Commission has approved the proposed merger of processors Teys Brothers and Cargill Beef Australia, finding no case to answer over possible concentration of market power or other concerns.

ACCC approval now clears the path for scrutiny of the merger by the Foreign Investment Review Board – the final hurdle before the merger can be consummated around early October, all going to plan.

In late May the ACCC launched an informal review of the proposed merger between the nation’s second and fourth largest beef processors. An ‘informal review’ is considered to be at the soft end of the range of options open to ACCC in its deliberations over mergers and acquisitions.

At the time, the director of the ACCC’s merger investigations branch said the merger was being considered under section 50 of the Competition and Consumer Act, which “prohibits mergers and acquisitions that substantially lessen competition in a market, or are likely to do so.”

The ACCC did not disclose how many, if any, submissions were lodged over the proposed merger.

"The ACCC formed the view that the proposed merger would be unlikely to substantially lessen competition in any of the markets examined," ACCC chairman Graeme Samuel said.

In a statement, the ACCC said it carefully considered the competition effects of the proposed merger in a number of markets including in relation to the acquisition of finished cattle ready for slaughter, the acquisition of feeder cattle destined for feedlots, and for the supply of processed beef to retailers and wholesalers.

In addition, the Commission also examined whether, after the merger, Cargill would be able to use its position in grain trading and marketing to deny supply or to raise prices of grain to competing feedlot operators.

"The ACCC concluded that the proposed merger would be unlikely to result in a substantial lessening of competition in any of the markets it examined, largely due to the fact that the operations of Teys and Cargill have limited geographical overlap," Mr Samuel said.

The costs of transporting cattle over long distances and the damage and stress that extended road travel could have on cattle meant that slaughter and feeder cattle were generally acquired from areas within reasonable proximity of abattoirs and feedlots. Competition between Teys and Cargill was limited as their abattoirs are located in different states and their feedlots are approximately 1100km apart, the statement said.

In considering whether the merger would enable the merged firm to depress slaughter cattle prices in the locations where both Teys and Cargill currently compete, the ACCC was satisfied that several existing competitors in these locations would be capable of responding by attracting business and winning market share away from the merged entity.

In the feeder cattle market, ACCC found that the significant geographical separation between Teys and Cargill's feedlots meant there was currently very limited competition between the merger parties for the acquisition of cattle.

There are also several competing feedlots situated between Teys and Cargill's feedlots which competed to acquire feeder cattle from the same geographic areas. Hence the proposed merger did not raise substantial competition concerns in that market, the statement said.

In the market for the supply of processed beef to retailers and wholesalers, the ACCC considered that any attempt by the merged entity to increase processed beef prices was unlikely to be successful as it would continue to face competition from a large number of existing competitors in that market.

The proposed merger was unlikely to give Cargill the ability or incentive to deny supply or to raise prices of grain to competing feedlot operators given the several remaining options available for sourcing grain, including from other grain traders and direct from growers.

In reaching its view on the proposed merger, the ACCC conducted extensive consultation of interested parties including cattle producers, feedlot operators, saleyard operators and agents, industry associations, abattoir operators, supermarkets and other suppliers and buyers of meat products.

Under the proposed arrangement, US-owned Cargill Beef Australia will buy the Packer family’s stake in Teys, creating a 50:50 joint venture. This will turn the nation’s second and fourth largest beef processors into an industry behemoth with capacity to kill 1.5 million cattle a year – within sight of major rival, JBS Australia’s 1.98m head.

In a joint statement issued on Thursday, Teys Bros chief executive Brad Teys said  both companies were pleased to be one step closer in joining their busiensses.

"The new joint venture will give us the scale and flexibility to better service our domestic and export customers to grow our business. This will also help us to expand the number of foreign markets we are currently selling Australian beef.”

“Both Teys and Cargill are committed to keeping the plants that are operating today open after the merger. The combined business will make us more competitive in serving both our Australian and export customers,” Mr Teys said.

Cargill Beef Australia managing director Andrew Macpherson said combining the businesses provided the experience, scope and scale to build a world-class beef processing company, and that translated into more job security for employees and would drive the company's growth for cattle from Australian producers.