Elders CEO Mark Allison.

ELDERS has assured “a light touch integration” of the Australian Independent Rural Retailers business into its network, after Australia’s competition regulator decided not to oppose its proposed acquisition of the rural wholesale buying group.

The Australian Competition and Consumer Commission has said it will not oppose the proposed acquisition of rural wholesale buying group Australian Independent Rural Retailers (AIRR) by Elders (ASX: ELD).

The ACCC said Elders is an important competitor in rural retailing, but currently has minimal operations in wholesaling to independent rural retail stores. AIRR is an important wholesaler to independent rural stores, but has minimal assets of its own in rural retailing.

Elders Limited managing director and chief executive officer Mark Allison said he welcomed the decision by the Australian Competition and Consumer Commission.

“It means both businesses can get on with delivering the transaction.

“Like Elders, AIRR is a business with a track record of driving Australian agricultural success,” Mr Allison said.

“It has grown consistently since its establishment in 2006. It’s a track record we wish to continue and support,” Mr Allison said.

“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,” he said.

ACCC deputy chair Mick Keogh said the commission 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.

“We tested these vertical issues closely with industry participants and independent retailers,” he said.

“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,” Mr Keogh said.

The ACCC said it 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.

“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,” Mr Keogh said.

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,” Mr Keogh said. Further information is available here.

 AIRR supplies to about 2000 independent stores

Elders is a publicly listed company that provides a large range of rural services including the retail of rural merchandise through its retail stores.

Elders has approximately 450 points of presence across Australia which are predominantly comprised of 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. It acts as a wholesaler to its own stores and supplies a small amount of product on a wholesale basis outside the Elders network. It also provides wool broking and livestock and real estate agency services in Australia, and operates a red meat supply chain in Indonesia and China.

AIRR is predominantly a buying group, which wholesales rural merchandise. It also owns six rural merchandise retail stores in Victoria (in 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.