DLF Seeds A/S - PGG Wrightson Seeds Holdings Limited

Summary

DLF proposes to acquire PGW Seeds.  DLF and PGW Seeds both breed and supply grass seeds for use in fodder and turf applications.

Market definition

The ACCC considered the effect of the proposed acquisition on the markets for the supply of turf grass seeds and fodder grass seeds.  The ACCC also considered whether there were narrower markets of relevance, including the supply of perennial fodder seeds (typically ryegrass seeds) with endophytes for high intensity grazing. High intensity grazing mostly occurs in the dairy farming regions of South Eastern Australia.

The ACCC considered that the geographic boundaries for these markets was likely to be Australia wide.  However, if a narrower product market definition were adopted (i.e. perennial fodder seeds (typically ryegrass seeds) with endophytes for high intensity grazing) the relevant geographic dimension of such markets might be further broken down into the different dairy regions.

The ACCC did not consider it necessary to form a concluded view on the relevant markets given that for the reasons outlined below in the Competition Analysis it considered competition concerns were unlikely regardless of the market definition.

Competition analysis

The ACCC concluded that the proposed acquisition would not be likely to substantially lessen competition in any relevant market.

The ACCC focused on the overlap between the parties for existing and pipeline perennial ryegrass seed products which incorporate novel endophytes.  It also considered the consequences for future R&D to develop new seeds.

The ACCC concluded that a combined DLF Seeds/PGG Wrightson Seeds will continue to face competition from remaining suppliers, including large global seed producers such as Heritage that have significant seed breeding and endophyte research programs.  DLF Seeds has a relatively small presence in Australia, and the ACCC considered it was unlikely to pose a substantial competitive constraint absent the merger.  The ACCC considered that other suppliers would continue to compete by investing in R&D to develop new seeds.

The ACCC also noted that there is at least some degree of substitutability between perennial ryegrass seeds with endophytes and other fodder seeds.  For example, perennial ryegrass seeds with no endophytes, annual ryegrass seeds and other fodder seed varieties like fescue are sometimes used in high intensity dairy grazing.