ACCC warns Ruralco takeover could lead to higher prices for farmers
The proposed deal would change the rural merchandise supplies sector, because Canadian-based Nutrien already owns the large rural merchandise business Landmark.
On Thursday the Australian Competition and Consumer Commission (ACCC) outlined its preliminary findings, saying Landmark already had about 225 rural merchandise retail outlets across Australia.
Ruralco has about 106 retail outlets, meaning that under the proposed deal the merged entity would have about 331 retail outlets.
The ASX-listed Elders has the second biggest retail footprint in the sector, with 217 retail outlets.
These rural stores are regarded as the farmers' Bunnings, selling crucial farm and rural merchandise like fencing materials, fertilisers, seeds, animal health and many other products.
The ACCC released a preliminary list of seven areas across the country where Landmark and Ruralco faced limited competition from other stores.
"In these areas, the ACCC considers that the removal of Ruralco could potentially result in a substantial lessening of competition," it said.
"A merged Landmark-Ruralco would be by far the largest retail and wholesale supplier of rural merchandise in Australia, with Elders the only other large national chain," ACCC deputy chair Mick Keogh said.
The ACCC would continue examining what impact the loss of a major national retail competitor might have on prices, product range and other areas of competition, he said.
"The merged entity would have about 45 per cent of the rural merchandise outlets in Australia. And as such we think raises some questions about the national impact of a chain of that scale," he said, in an interview with The Age and Sydney Morning Herald.
"In other words could they get, for example, deals from suppliers or those sort of things that are advantageous and allow it to reduce competition," he said.
Asked if the ACCC was raising red lights or amber lights to the proposed deal, Mr Keogh said: "I would characterise them as amber lights."
Under the proposed deal unveiled in February, Nutrien would acquire all of Ruralco's shares for a cash price of $4.40 per share.
A spokeswoman for Nutrien said: "We believe the combination of Landmark and Ruralco would provide a stronger offering to regional and rural Australians. The combined businesses would offer farmers across Australia an enhanced level of service, expertise and product delivery."
Ruralco said the ACCC's statement was "not a final decision" and its board continued to recommend shareholders back the deal with Nutrien, in the absence of a superior proposal.
Ruralco also said the deal would "create a robust rural services provider, with significant benefits for farmers, businesses and communities across regional and rural Australia".
Shares in Ruralco fell 3 per cent on Thursday, to close at $4.15.
Source: Sydney Morning Herald