The Ruralco Holdings Ltd (ASX: RHL) share price has come under pressure on Thursday after the Australian Competition and Consumer Commission (ACCC) gave its verdict on Nutrien's proposed $4.40 cash per share acquisition of the agribusiness company.
At one stage Ruralco's shares were down as much as 6% to $4.03. They have since recovered slightly and are down just over 3.5% to $4.12 at the time of writing.
What did the ACCC say?
This morning the ACCC released a statement of issues raising preliminary competition concerns about Nutrien's proposed acquisition of Ruralco.
The release explains that Nutrien operates in Australia through its wholly owned subsidiary, Landmark. Landmark and Ruralco supply rural merchandise such as fertiliser, fencing and animal health products, and other services through their branded retail store networks. Both companies also have wholesale businesses supplying rural merchandise to independent stores.
The ACCC notes that the combination of Landmark and Ruralco would create the largest retail and wholesale supplier of rural merchandise in Australia. It would also leave Elders Ltd (ASX: ELD) as the only other large national chain.
The competition watchdog said: "The combined entity would supply around 650 rural merchandise stores (including both corporate and member stores), which is approximately 45 per cent of all rural merchandise stores nationally."
As a result, it is examining what impact the loss of a major national retail competitor might have on prices, product range, and other areas of competition.
In addition to this, the ACCC notes that Ruralco is a major wholesaler to independent rural merchandise stores through its CRT operation, and Landmark also has a smaller wholesale operation.
It is now looking into "whether the proposed acquisition would reduce competition at the wholesale level, or whether the remaining wholesalers or buying groups (AIRR, NRI and AgLink) will provide sufficient competition."
And finally, the competition watchdog advised that it "is examining whether a merged Landmark-Ruralco would be more likely to discriminate against retailers which are wholesale customers that compete with its retail stores."
One positive, though, is that the ACCC doesn't believe the proposed deal would substantially lessen competition in the supply of wool broking, livestock agency and live export, insurance broking, financial services and real estate agency services.
Ruralco has responded to the statement of issues this morning and remains positive on the takeover.
It said: "Ruralco continues to engage with the ACCC in its review of the proposed transaction and is confident the issues raised can be addressed to the satisfaction of the ACCC. Ruralco continues to believe the Scheme will create a robust rural services provider, with significant benefits for farmers, businesses and communities across regional and rural Australia."
