Gallagher Group to quit Tru-Test stake in Australian expansion
Gallagher Group, the privately held agricultural equipment firm, will exit its 12 percent stake in rival Tru-Test Corp as a condition of grabbing a value brand across the Tasman by buying Australian firm Country Electronics.
The Australian Competition and Consumer Commission won't oppose Gallagher's acquisition of Country Electronics, which trades as Thunderbird, after accepting the Hamilton-based group's offer to divest its Tru-Test stake, the regulator said in a statement yesterday.
Gallagher chairman and chief executive Sir William Gallagher said Thunderbird won't be a big percentage of the group, but offers access to the bottom end of several markets, particularly Australia.
"It's more complementary with us - we're the premium brand," Gallagher told BusinessDesk.
Gallagher lifted its annual revenue 6.9 percent to $187 million in 2012, according to the TIN100 where it ranked fifth among the country's biggest hi-tech firms.
The Thunderbird acquisition is dependent on the sale of the Tru-Test holding, which Gallagher said he expects to come through early next year.
"We've still been very active competitors, and giving that up is not a great penalty," he said.
The court enforceable undertaking allayed the regulator's concerns of Gallagher having a stake in its most significant competitor after the acquisition, it said. Without the divestiture, the ACCC thought Gallagher had the ability to unilaterally raise prices and reduce service in an already concentrated market.
"The ACCC ultimately concluded that the acquisition would be unlikely to substantially lessen competition in any relevant market, taking into account the undertaking," commissioner Jill Walker said.
"The acquisition will result in the merged entity holding the largest market share for the provision of electric fence products, however the ACCC considers that the merged entity will be constrained by continuing competition from existing competitors and the threat of expansion," she said.
Market participants didn't consider Thunderbird's animal weighing scales were of an equal standard to Gallagher's, meaning it wasn't an effective competitor, the ACCC said.
Gallagher made a hostile takeover bid for Tru-Test in 2004 and was knocked back by New Zealand's Commerce Commission. It had another look in 2010, which didn't progress beyond initial interest. Gallagher is the second-biggest shareholder in Tru-Test, according to filings with the Companies Office.
This year Tru-Test doubled in size after buying Dairy Technology Services in January for some $73 million, and has been on the hunt for more acquisitions.