Sector News

GrainCorp approved to take over Cargill site

October 13, 2016
Consumer Packaged Goods

A backer of the failed bid to privatise Australia’s largest grains accumulator and exporter has approval to eliminate “a close competitor” from its own grains network.

The Australian Competition and Consumer Commission (ACCC) said on Thursday last week it would not oppose GrainCorp Ltd’s proposed acquisition of Cargill Australia Ltd’s bulk grain storage and handling facility at Gilgandra, New South Wales.

The Cargill facility is next to GrainCorp’s storage and handling facility in the Central West NSW town.

GrainCorp, with a 20 million tonne capacity grain storage network comprising 180 sites – most serviced by rail – in central and southern Queensland, across NSW and in north and western Victoria, is the largest grains accumulator and trader in Eastern States.

Acquisition of the Gilgandra site for an undisclosed amount by GrainCorp will leave Cargill, a wholly-owned subsidiary of its privately-owned Minnesota-based international parent company, with 21 storage sites across NSW, Victoria and into South Australia.

Grain growers and “other market participants” were generally not concerned with the acquisition, ACCC chairman Rod Simms said.

“The ACCC conducted extensive market inquiries with market participants, including grain growers, grain traders, exporters, and competing suppliers of storage and handling services in the Dubbo region,” Mr Simms said.

“Despite the transaction resulting in the removal of a close competitor to the existing GrainCorp site in Gilgandra, based on market feedback, the ACCC considered that there will be effective competition from other suppliers of storage and handling services in the region.”

The loss of an alternative bulk storage site would also be partly offset by increasing on-farm grain storage, Mr Simms said.

He said it was “unlikely” GrainCorp would discriminate between different growers on price or services offered.

“In forming this view, the ACCC noted that GrainCorp publishes a schedule of fixed storage and handling fees on the east coast.

“In addition, GrainCorp would continue to have an incentive to deliver efficient services to growers, in order to maximise throughput in its facilities,” Mr Simms said.

GrainCorp was one of the financiers of a cash and script offer by Australian Grains Champion (AGC) to 4200 grower members of CBH Group earlier this year.

Managing director and chief executive officer, Mark Palmquist, said GrainCorp and its consortium partners concluded their financing agreement with AGC when it formally withdrew its offer last month.

Potential for detailed CBH operational and financial information to be exposed through the due diligence process to its major competitor in GrainCorp, was one of the reasons the CBH board gave for not allowing the AGC offer to go to a vote of members.

By Mal Gill

Source: Farm Weekly

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