Competition a concern in AGT's proposed acquisition of InterGrain

by Holly Demaree
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Barley
Wheat and barley breeding involves cross-breeding existing varieties of wheat and barley in order to maximize beneficial characteristics.
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MELBOURNE, AUSTRALIA – The Australian Competition and Consumer Commission (ACCC) has issued a Statement of Issues expressing initial concerns about the proposed acquisition of InterGrain Pty Ltd by Australian Grain Technologies Pty Ltd (AGT).

The ACCC’s preliminary view is that the proposed acquisition may substantially lessen competition in relation to the breeding and development of barley seed varieties for the Australian market.

Wheat and barley breeding involves cross-breeding existing varieties of wheat and barley in order to maximize beneficial characteristics, such as suitability to local soil types or climate, resistance to disease or to increase yield. Developing and testing a new variety and bringing it to market generally takes approximately 10 years for wheat and 12 years for malting barley.

Mick Keogh ACCC Commissioner
Mick Keogh, commissioner of the ACCC.

“The proposed acquisition would combine the only two significant players in the breeding and development of barley in Australia,” said Mick Keogh, commissioner of the ACCC.

According to the ACCC, AGT is Australia’s largest wheat breeding company and has an expanding barley breeding program, supported by its international shareholder and partner, Limagrain. InterGrain has wheat and barley breeding programs with breeding facilities in Western Australia, South Australia and Victoria.

The University of Adelaide, which until recently competed with AGT and InterGrain, announced in April 2016 that it was withdrawing from barley breeding.

“The ACCC is concerned that the loss of competitive tension may allow the combined entity to reduce investment in the research and development of new barley seed varieties, and to raise the levels of the royalties it charges farmers for using its seeds,” Keogh said.

The primary revenue source for seed breeders are royalties collected from growers when they sell grain produced using a particular seed variety.

While AGT and InterGrain also overlap in the breeding and development of wheat seed varieties, the ACCC’s preliminary view is that the combined entity would continue to face sufficient competitive constraint from alternative wheat seed breeders and threat of new entry.

AGT, established in 2002, is owned by the Grains Research and Development Corp. (GRDC), Vilmorin & Cie (Limagrain), the South Australian government and the University of Adelaide.

InterGrain, established in 2007 is owned by the Western Australian government and the GRDC.

The ACCC invites further submissions from interested parties in response to the Statement of Issues by April 19. The ACCC’s final decision is currently set to be announced on May 25. The Statement of Issues is available on the public register: Australian Grain Technologies Pty Ltd - proposed acquisition of InterGrain Pty Ltd.

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