Regulator weighs SI flour mill bid

One of New Zealand’s two locally owned flour mills is set to be sold to offshore interests if a proposed acquisition gets the tick from the Commerce Commission.

Farmers Mill opened in Timaru in 2013, and is ultimately owned by a group of Canterbury wheat growers, who imported a $12 million milling plant from Italy to process local grain, mostly their own.

Now British-owned George Weston Foods NZ, trading as Mauri NZ, wants to buy the business.

Pricing, relative capacity, recent market performance and other details are confidential.

But in its application to the commission, Mauri says that the deal will allow it to compete more effectively over the medium to long term.

This is because the quality of the Farmers Mill plant offers efficiencies in running costs, labour and wheat extraction rates.

The acquisition will not substantially lessen competition in any market, Mauri says.

“The relevant wheat and flour markets are national. In these markets, the acquisition would only produce a minor aggregation in Mauri NZ’s market shares and would have no impact on competition.”

Regionally, the sale would only lead to ‘very minor’ aggregation in North Island markets, and a slightly greater aggregation in the South Island would be offset by – among other things – the fact that much of Farmers Mill flour is sent to the North Island.

Interestingly, all discussion in the Commerce Commission application of competition, relative market share and power dynamics between the current NZ millers relates to end-use customers and flour supplies.

No mention is made of any potential effects of the proposed acquisition on wheat growers themselves.

Mauri does note that if it buys Farmers Mill, wheat currently supplied by its owners will become freely available in the market, rather than only processed through the Washdyke plant.

Mauri mills flour at three sites, in Auckland, Wellington and Christchurch.

The Christchurch mill mostly processes wheat grown in the South Island, while wheat bought to put through North Island mills mostly comes from Australia growers, supplemented by southern wheat as needed.

The other major miller in NZ – Champion – is Japanese owned, with sites in Mt Maunganui and Christchurch.

NZ Flour Mills, based at Tirau, is the only other locally owned milling company in NZ outside of Farmers Mill.

Farmers Mill is currently owned by Murray Turley, Peter and Sonya Callahan, Biggs Agriculture, Alan Wilson, Raymond Bowan, Fallgate Farming and Bowan James.

Echoing ongoing commentary around the number of meat processing plants in NZ, Mauri notes ‘acute’ excess milling capacity in this country.

“Mauri NZ NZ understands that per capital milling capacity in NZ is very high by international standards.

“It believes that it has arisen due to two main factors. One, once a mill is constructed, it is fairly easy to increase capacity. Two, each milling company has won and lost significant contracts and continues to compete for them so has invested to ensure it has the capacity to perform.”