Lack of trust hitting ABP-Slaney deal

The IFA published its report on the likely competition impact of the proposed ABP acquisition of the Allen family shares in Slaney Foods this week. Prepared by Dr Pat McCloughan of PMCA Economic Consulting, the report analyses the proposed venture from how it would affect the market for farmers selling cattle and indeed customers at the other end of the chain.

We have full analysis of the report here but it is significant that the conclusion recommends further in-depth analysis of the businesses from different perspectives before the European Commission’s Directorate-General for Competition comes to a conclusion. This neatly summarises the problem with major privately owned multinational companies that dominate the Irish beef and sheepmeat industry. The lack of transparency on all aspects of the business means there is no farmer confidence or trust in the companies that purchase their finished livestock.

Therefore, every venture that potentially removes a player suggests a threat and using the economic measurements for concentration, it is clear there is a case to answer with the Slaney deal. This fear generated by acquisitions, mergers or joint ventures in the meat sector contrasts with the encouragement for rationalisation in the dairy sector. The openness and transparency of the co-op ownership structure and farmer participation on the boards means farmers understand and are confident in the operation of the processing side of the business.

Many reports have suggested that the Irish meat processing industry would benefit from rationalisation as well, but such is the lack of farmer confidence in processors that any suggestion of this is met with robust opposition. In the absence of the major processing groups adopting a transparent plc model, it falls to the minister to legislate to require factories to publish the key data relating to their business. If this information was available, farmers could examine mergers and acquisitions from a better informed position.

The IFA report is working with the reality of what exists rather than what would be the ideal environment. In this context, it poses plenty of questions that the DG for Competition in Brussels needs to satisfy themselves with the answers to before endorsing the proposed acquisition of the Allen shares in Slaney by ABP.

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Listen: IFA releases ABP-Slaney competition report

Analysis: the IFA's report on ABP-Slaney deal

Full coverage: ABP-Slaney deal