Elders Ltd (ASX:ELD) has confirmed it’s been the subject of communications from the competition regulator over its proposed buyout of competitor Delta Agribusiness, a privately held player.
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In short: The ACCC isn’t sure if the deal is kosher. It’s lobbed a Statement of Issues (SOI) letter at Elders, and SOI is basically a heads up to the company that the regulator may feel compelled to look into the deal.
“The SOI is not a final decision, and instead provides a preliminary view on potential competition issues that require further investigation by the ACCC,” Elders informed shareholders on Thursday.
If Elders shareholders were skittish around the news, it wasn’t evident in lunchtime trades. The stock was up +0.6% on $3.3M worth of trades, per Market Index data.
Shareholders are probably well aware one-year returns are down -23%. And while a big fat “no” from the ACCC on the Delta bid would be disappointing, it’s not like the company necessarily pivots on whether the deal goes through.
The regulator’s emerging concerns with the deal are fairly straightforward. Elders, which supplies agritech retail products across Australia, does what Delta does – sell fertilisers and the like.
Except the ACCC isn’t yet entirely sure how big the implications are.
“We are continuing to investigate how closely Elders and Delta retail stores compete with each other, and the extent to which larger retail chains and smaller retailers … are likely to compete with Elders if the proposed acquisition were to proceed,” ACCC Deputy Chair Mick Keogh said.
But it’s got a hunch of where to look for stress. The deal would probably hit Western Australian markets the hardest, with the wheatbelt the key area of focus.
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“The ACCC’s preliminary view is the proposed acquisition is likely to substantially lessen competition in the retail supply of rural merchandise in certain local markets in the North-West Victoria, Northern Wheatbelt (WA), Central Wheatbelt (WA), Great Southern (WA) and Murray-Mallee (SA) regions,” the ACCC wrote.
ELD last traded at $6.22/sh.
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