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Cargill Australia’s oils and fats acquisition in trouble

By Jess Halliday , 31-Mar-2010
Last updated on 31-Mar-2010 at 12:54 GMT

Cargill’s bid to buy Goodman Fielder’s edible fats and oils business looks to be scuppered by the Australian competition authorities, who say it would be an unacceptable concentration of refining assets in the country.

Global agri-food firm Cargill operated both as a refiner and a supplier of crude oils to other Australian refiners. Goodman Fielder, meanwhile, is the biggest refiner of edible oils and fats in the country, whose products include margarines, oil blends, bakery fats and liquid oils.

Goodman Fielder put its oils and fats business up for sale in May 2009, saying it was a misfit with its mainly retail-focused portfolio. A deal was struck for Cargill to buy it for a reported A$240m in December, as a boost to its development in the Australasian region.

But the Australian Competition and Consumer Commission (ACCC) has said the deal should not go ahead as the two companies were each others’ main competitors. Not only would the combination of their activities leave only a few small competitors active in the sector, but because Cargill is a crude oil supplier these smaller players could face problems sourcing the inputs they need.

“The findings led the ACCC to conclude that the proposed acquisition would likely result in a substantial lessening of competition in markets for the supply of certain refined oil products, in particular those products used by industrial food manufacturers to make a range of food products,” said ACCC chairman Graeme Samuel.

Such a substantial lessening of competition is prohibited under Australia’s Trade Practices Act 1974.

Reassessment?

Neither Cargill nor Goodman Fielder could be reached for comment prior to publication of this article, but newswire Bloomberg reports a Goodman Fielder spokesperson as saying that if a solution cannot be reached, the seller will consider holding to on the oils and fats business and restructuring it to make it more profitable.

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