The Australian Competition and Consumer Commission (ACCC) will not oppose the proposed acquisition of Lion Dairy & Drinks’ Tasmanian-based cheese business by Saputo Dairy Australia.
In a statement yesterday (26 September), the competition regulator said after consultation with “many farmers and other interested parties” it did not think the deal would substantially lessen competition.
ACCC deputy chair Mick Keogh said: “We looked very closely at the transaction because it will combine the processing plants of the second and third biggest raw milk buyers in Tasmania. We spoke with many farmers and other interested parties.”
Its investigation included a detailed examination of the impact the deal would have on competition for the acquisition of raw milk.
On 26 April, Saputo announced it had entered an agreement with Lion Dairy & Drinks to acquire its speciality cheese business for $280 million on a cash-free and debt-free basis, to be paid in cash and available credit. The business's revenue was $192 million for the 2018 calendar year and employs around 400 people. Saputo said the acquisition would “further diversify its product offering” (Food & Drink Business, 08/08/2019).
The agreement would see Saputo acquire Lion’s Tasmanian cheese processing plants, located in Burnie and King Island, as well as Lion’s cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.
Saputo currently owns a milk processing plant in Smithton, Tasmania. In Australia, the company produces dairy products including cheese, fresh milk, butter, cream and milk powder. Its Smithton processing plant produces bulk milk powder, and bulk butter and cream.
Fonterra is the largest buyer of raw milk and Saputo’s closest competitor in Tasmania, the ACCC said. Other processors include Mondelēz-Cadbury, Lactalis-Parmalat and a small fresh-milk plant in Hobart that Lion will retain.
Keogh said some farmers were concerned the competitive contract terms they had been offered by Lion would be lost after the proposed acquisition, but most were not worried about it. “[They] told us the remaining milk processors will keep price and non-price terms competitive. Many farmers expressed strong support for Saputo’s investment in cheese production in Tasmania,” he said.
“Ultimately, and on balance, we do not think this acquisition is likely to have the effect of substantially lessening competition.
“However, the ACCC acknowledges that there is a significant degree of concentration in the Tasmanian dairy sector. Any further consolidation of dairy processors would cause significant concern.”
Cheese supply considered
The regulator also looked at any impact the proposal might have on Australian cheese supply and determined it was unlikely to substantially lessen competition.
Saputo’s cheese brands include Coon, Sungold and Devondale and Lion’s cheese brands include South Cape, King Island Dairy and Tasmanian Heritage.
“Lion focuses on premium speciality cheeses and Saputo focuses on everyday cheeses. We considered that a combined Saputo-Lion would face continued competition from domestic cheese producers, supermarket private labels, and cheese importers,” Keogh said.
