The Australian Competition and Consumer Commission says it will not oppose the proposed $600 million acquisition of Lion Dairy & Drinks by China Mengniu Dairy Company, citing “relatively low” levels of aggregation for raw milk purchases.
The ACCC investigated whether the acquisition would impact on competition for raw milk purchases from dairy farmers in the Gippsland region, as it is the only area with processing facilities ultimately owned by both Lion D&D and Mengniu.
Mengniu has proposed to acquire Lion D&D’s raw milk processing facilities in Australia, two of which are located in Chelsea and Morwell in Victoria. The acquisition was first proposed in November, with the sale to include all white milk, milk-based beverages, yoghurt, juice and water ice brands and assets.
The ACCC also found one of Mengniu’s subsidiaries had an indirect interest in wholesale dairy product distributor Burra Foods, which has a raw milk processing facility in Korumburra, Victoria.
ACCC deputy chair Mick Keogh said that while Burra and Lion D&D compete for the acquisition of raw milk, the companies are not close competitors.
“Our investigations concluded that dairy farmers are unlikely to switch between the two,” said Keogh.
“The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion D&D combined acquiring less than 25 per cent of raw milk in Gippsland. Two other large raw milk buyers remain in the Gippsland region, Saputo and Fonterra, as well as some smaller processors.”
Farmers in the region will also have alternative potential buyers for their milk as the ACCC found “there was considerable spare processing capacity at other raw milk processors”.
In September, Mengniu had announced it had entered a Scheme Implementation Deed with Bellamy’s Australia to acquire 100 per cent of Bellamy’s issued shares.
