New Zealand's competition watchdog is assessing J&P Turner's proposed purchase of T&G Fresh over concerns it could make growers “more vulnerable” to market power.
In a so-called "statement of issues", a document published as part of an examination of an M&A deal, the Commerce Commission said it is “not currently satisfied that the proposed acquisition would not be likely to substantially lessen competition in a market in New Zealand” based on the evidence gathered so far.
However, it stressed no final decision has been made.
Auckland-based T&G Global agreed to the sale of T&G Fresh in July, as part of a three-part divestment to sharpen its focus on apples and “IP-led” fruit. T&G Fresh grows tomatoes, berries, citrus and stone fruit.
JPT will acquire T&G’s New Zealand fresh produce arm, while Pukekawa Holdings and Ashsadeep Company will buy 51% of T&G's domestic root-crop prepacking operation, Unearthed Produce. The deal also includes the acquisition of the Fiji and Pacific export operations by Bidfood Pacific Islands.
The Commission is now examining whether the deal with JPT could reduce competition in buying fresh produce from growers and in supplying the products to wholesale customers including supermarkets, greengrocers and meal-kit companies.
Its main concern so far is the effect on growers, with most feedback focused on the buying side rather than wholesale customers.
The regulator flagged concerns over growers’ vulnerability as they often have less visibility over end prices, weaker bargaining power and less ability to resist lower prices.
It also outlined growers’ worries of higher commission rates and worse contract terms resulting from the proposed deal.
The watchdog said JPT and T&G Fresh appear to compete “closely” in some produce categories, regions and customer groups.
It said it is not yet convinced remaining competitors such as MG Group, other wholesalers, distributors or direct supply channels would provide “sufficient” constraint.
The Commission is also assessing whether a merged business with vertically integrated positions in tomatoes, cucumbers, courgettes and cherries could disadvantage independent growers.
JPT has pushed back, arguing the merged business would have only a “modest” combined market share and that the two companies are not each other’s “closest” rivals.
It said competition would remain from MG, wholesale distributors and direct grower supply.
JPT also argued barriers to entry are “low” and that retailers and growers have “significant” countervailing power.
The regulator will decide on the acquisition by 5 November, subject to extension, with submissions due by 23 September.
