The ACCC will not oppose the acquisition of animal feed supplement supplier, XF Australia Limited by Graincorp Limited (ASX: GNC).
GrainCorp and XF Australia both supply molasses-based liquid animal feed supplements across the east coast of Australia.
GrainCorp acquires molasses as an input for its feed supplements from sugar mills and on-sells surplus amounts to other distributors, competing producers of animal feed supplements and farmers directly.
XF Australia acquires molasses from sugar mills to produce its supplements but does not resell molasses to third parties.
Animal feed supplements are important to cattle farmers particularly during periods when pasture supply and quality is low and animals require additional nutrients.
Molasses is a valuable source of energy and is a useful input for animal feed supplements.
The ACCC’s review focused on the closeness of competition between GrainCorp and XF Australia. This included whether the removal of XF Australia would substantially lessen competition in the supply of animal feed supplements in regional markets across the east coast of Australia.
Another focus of the review was whether the acquisition would provide GrainCorp with the ability or incentive to restrict sale of molasses to other third-party distributors and competing producers of animal feed supplements.
ACCC commissioner Stephen Ridgeway said after carefully examining the molasses supply arrangements between GrainCorp, XF Australia, other animal feed supplement suppliers and sugar mills, they concluded there would be no substantial lessening of competition.
The ACCC consulted with a wide range of market participants, including feedlot owners and graziers, competitors as well as third party distributors of molasses and sugar mills.
“We have listened to the concerns expressed by some businesses about shortages of molasses supplies from to time to time, particularly during times of severe drought. We have been very careful in examining this proposed acquisition to ensure that it does not exacerbate these existing challenges in a way that breaches our merger laws,” Mr Ridgeway says.
The ACCC concluded GrainCorp will still face significant competition from other animal feed supplement suppliers such as Bundaberg Molasses and Riverina.
The ACCC also considered whether the proposed acquisition would reduce molasses supplies to downstream players.
“We concluded that competing animal feed supplement suppliers will still be able to obtain molasses supply directly from sugar mills, distributors and other resellers,” Mr Ridgeway says.
XFA is a provider of feed supplement products and nutritional consulting services to Australia’s feedlot and grazing sector. It was founded in 1993 and trades under two main brands: Performance Feeds – a leading manufacturer of a range of liquid and loose lick nutrition supplements to help boost production and performance, and optimise the all-round health of sheep, XF Australia Pty Ltd beef, and dairy cattle; and NSA – a feedlot performance and nutritional consulting business providing both independent advice and trace mineral premix production services.
XFA operates three manufacturing sites in Queensland (Brandon, Dalby, and Kingsthorpe) and one manufacturing site in Victoria (Kyneton) and has a team of highly skilled animal nutritionists with postgraduate qualifications.
