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The Australian Competition and Consumer Commission (ACCC) has given agribusiness Elders (ASX: ELD) the go-ahead to acquire Australian Independent Rural Retailers (AIRR).
Elders will buy AIRR for a cash-scrip consideration of $10.85 per share, valuing the rural merchandise, pet and produce chain at $157 million on an equity basis.
AIRR's best known brand is Tuckers Pet & Produce which provides goods for the equine, livestock and companion animal markets.
AIRR is also behind agricultural chemical company Apparent and animal health product business Independents Own.
Combined, the AIRR network comprises of 240 independent member stores plus 100 Tuckers Pet & Produce stores nationwide.
The ACCC says that while Elders is an important competitor in rural retailing, it currently has minimal operations to independent rural retail stores. On the flip side, AIRR is an important wholesaler to independent rural stores, but has minimal assets of its own in rural retailing, making the two an easy fit.
"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," says ACCC Deputy Chair Mick Keogh.
"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," says Keogh.
"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."
"Ultimately we decided that there would not be a substantial lessening of competition in any relevant market."
Shares in Elders are down 0.88 per cent to $6.72 per share at 10.04am AEST.
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