Friday, March 29, 2024

Seeds merger worries commission

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A merger of DLF Seeds and PGW Seeds might raise prices and reduce quality of ryegrass for kiwi customers, the Commerce Commission says.
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It has given DLF Seeds till December 14 to respond to the concerns raised its preliminary view of the likely loss of a competitor in the production and supply of ryegrass seeds.

The commission questioned DLF’s view, in its application for approval to take over the PGW Seeds business, ryegrass and tall fescue are in the same market. It believes the ryegrass market is narrower than the combined market.

PGG Wrightson has agreed to sell PGW Seeds to Danish group DLF for about $430 million. Commerce Commission approval is one of several conditions to be met for the sale to proceed. 

A merger  of the two groups would combine two of the three main endophyte research and development programmes that have produced endophytes capable of inoculation into commercial ryegrass varieties, which might affect both current and future competition in the supply and production of ryegrass seeds, it said.

That could enable the merged entity to unilaterally increase prices and to potentially slow down the pace of development of new endophytes.

PGW Seeds and Barenburg Agriseeds dominate the NZ market with DLF Seeds among a group of minor suppliers. 

However, the commission said an analysis of the market is likely to understate DLF Seeds’ importance. Though it is a relative newcomer to NZ it is a successful ryegrass endophyte developer, including high performing cultivars specifically for NZ conditions.

The commission believes DLF’s place as a competitor to PGW Seeds might not be able to be replicated by other small competitors.

Information from market participants suggests it can take up to 15 years to identify and commercialise a new novel endophyte, with no certainty of success.

The commission said it is also exploring the AgResearch and PGW Seeds joint-venture in endophyte research and development and the impact on it of the planned merger.

“Some interested parties have suggested that PGW Seeds, through its various relationships, has the ability to influence industry bodies in an anti-competitive manner and that the planned merger may increase the merged firm’s ability to do so in the future.”

The commission is considering whether PGW Seeds, AgResearch and DLF Seeds status on industry bodies would give the merged group the ability to hamper entry or expansion by existing or future competitors.

It also said the merger parties are the only suppliers producing turf seeds in NZ. That iss being assessed.

It believes relevant forage and turf seeds markets are national in scope and is continuing to assess the tall fescue, brassica/fodder beet, clover, and cocksfoot seeds markets.

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