ACCC Gives Green Lights To Lion-Saputo Cheese Deal

By Glenn Dyer | More Articles by Glenn Dyer

Still in dairying, this time in Australia and the competition regulator, the ACCC says it will not oppose the proposed acquisition of Lion Dairy & Drinks’ Tasmanian-based cheese business by Saputo Dairy Australia.

Lion is owned by Japanese brewer Kirin and Saputo is a major Canadian-owned dairy company.

Saputo is proposing to buy Lion’s Tasmanian cheese processing plants, located in Burnie and King Island, and Lion’s cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.

Saputo has an existing milk powder processing plant in Smithton, Tasmania. The ACCC said its investigation included a detailed examination of the impact this deal would have on competition for the acquisition of raw milk.

“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,” ACCC Deputy Chair Mick Keogh said in a statement yesterday.

Fonterra is the largest buyer of raw milk and Saputo’s closest competitor in Tasmania. Other processors include Mondelez-Cadbury, Lactalis-Parmalat and a small fresh-milk plant in Hobart that Lion will retain.

“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.”

“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,” Mr. Keogh said.

The ACCC also examined the impact of the proposed acquisition on the supply of cheese in Australia.

Saputo’s cheese brands include Coon, Sungold, and Devondale and Lion’s cheese brands include South Cape, King Island Dairy and Tasmanian Heritage. The ACCC determined that the proposed acquisition is unlikely to substantially lessen competition in the supply of cheese.

“Lion focuses on premium specialty 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,” Mr. Keogh said.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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