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ACCC not to oppose Wesfarmers acquisition of IAMA

Document date:  Thu 08 Feb 2001
Published:  Thu 08 Feb 2001 00:00:00
Document No:  191349
Document part:  A
Market Flag:  Y
Classification: 

IAMA LIMITED                                  2001-02-08  ASX-SIGNAL-G

HOMEX - Perth                                                         

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The Australian Competition and Consumer Commission will not oppose
Wesfarmers proposed acquisition of IAMA but only after the parties
provided significant undertakings, ACCC Chairman, Professor Allan
Fels, said today.

The undertakings involve the sale of some rural merchandise outlets
and the distribution of fertiliser in Western Australia.

Wesfarmers Dalgety is a fully owned subsidiary of Wesfarmers. IAMA
and Wesfarmers Dalgety are two of the largest rural merchandise
wholesalers and retailers in Australia. In July this year, IAMA
announced that it was holding discussions with Wesfarmers about a
potential merger between IAMA and Wesfarmers Dalgety whereby
Wesfarmers would become the major shareholder in IAMA. On 27 November
2000, IAMA and Wesfarmers announced their intention to merge the IAMA
and Wesfarmers Dalgety businesses.

"The ACCC has undertaken extensive market inquiries into this
proposed merger. The ACCC has consulted with rural merchandise
suppliers, wholesalers and retailers as well as farming
organisations.

"Based on information collected during market inquiries, the ACCC had
concerns that the proposed merger would substantially lessen
competition in several markets for farming inputs in Western
Australia. The ACCC has accepted undertakings offered by the parties
that overcome these concerns.

"A primary concern was with the distribution of fertiliser in Western
Australia. CSBP is the dominant supplier of fertiliser to grain
farmers in WA. CSBP along with Wesfarmers Dalgety is owned by
Wesfarmers. CSBP is currently distributed through the Wesfarmers
Dalgety, Elders and RTC rural merchandise retail networks.

"CSBP's main competitor in the market for fertiliser in WA is Summit
Fertiiisers. The primary distributor for Summit in WA is IAMA, which
until recently, was also Summit's exclusive distributor.

"The ACCC had severe reservations about a allowing the situation to
develop whereby Wesfarmers not only owned the dominant brand of
fertiliser in CSBP, but also took majority ownership of IAMA, the
primary distributor of CSBP's main competitor in Summit.

"The ACCC has accepted an undertaking from the parties that the new
business in the next two years will take no steps to constrain the
terms upon which the agents and affiliates of the new business will
deal with fertiliser suppliers and will continue the existing
distribution agreement between IAMA and Summit.

"The ACCC was also concerned by the high level of market
concentration that a merged Wesfarmers Dalgety and IAMA would achieve
in regard to herbicides and animal health and nutrition products and
the possible ramifications this could have on competition for these
products in Western Australia.

"Advances in biotechnology and genetic engineering is likely to
increase the number of herbicide as well as animal health and
nutrition proprietary products coming onto the market. The dominance
that a merged Wesfarmers Dalgety and IAMA would enjoy in these
product lines could provide the merged entity with sufficient
leverage to negotiate sole distribution agreements with the suppliers
of new proprietary products. Sole distribution arrangements could
retard competition at the distribution level between rival rural
merchandise networks and retailers and enable the merged entity to
capture a significant profit margin.

"The ACCC's concerns in this regard have been addressed through an
undertaking by the new business to sell one of the two rural
merchandise outlets that the new business will have in Esperance,
Katanning, Merredin, Narrogin, and Geraldton. The new business is
required to sell in the first instance to another retailer of rural
merchandise that will be unaffiliated to the new business. This
undertaking will reduce the market concentration of the new business.

"After taking account of the undertakings offered by the parties, the
ACCC believes that the proposed acquisition is unlikely to lead to a
substantial lessening in competition".

FURTHER INFORMATION

Professor Allan Fels, CHAIRMAN, (03) 9290 1812 or pager 
(02) 6285 6170

Mr Ross Jones, COMMISSIONER, (02) 6243 1178

Ms Lin Enright, DIRECTOR PUBLIC RELATIONS, 
(02) 6243 1108 or (0414) 613 520

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