Australia's competition watchdog on Sept. 26 gave a green signal to Canadian cheese company Saputo Inc.'s proposed A$280 million acquisition of Tasmanian-based cheese business of Lion-Dairy & Drinks Pty. Ltd.
The Australian Competition and Consumer Commission, or ACCC, had previously raised concerns about the deal's impact on dairy farmers in Tasmania as it sought to combine the processing plants of the second and third biggest raw milk buyers in Tasmania. Fonterra Co-operative Group Ltd. is the largest buyer of raw milk and Saputo's closest competitor in Tasmania.
The regulator said that after "closely" examining the deal's impact on competition and speaking to farmers and other interested parties, it found that the transaction did not lead to "substantially lessening competition" and decided to not oppose the deal.
"Some farmers told us that Lion has been offering competitive contract terms and they were concerned these would be lost after the proposed acquisition. However, most farmers were not concerned about the transaction, and 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," ACCC Deputy Chair Mick Keogh said.
"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."
Other processors in the region include Mondelez International Inc., Lactalis-Parmalat and a small fresh-milk plant in Hobart that Lion will retain.
Lion Dairy & Drinks is a wholly owned unit of Japanese beverage-maker Kirin Holdings Co. Ltd. and produces brands such as South Cape, Tasmanian Heritage, Mersey Valley and King Island Dairy.
