The competition watchdog won’t oppose Saputo’s takeover of Lion’s Tasmanian cheese business, saying most local farmers think there will still be enough buyers to support prices.
The Australian Competition and Consumer Commission last month expressed fears that dairy farmers could feel a price squeeze from the deal, but on Thursday said many had expressed strong support for Saputo’s investment in Tasmanian cheese production.
“Most farmers were not concerned about the transaction, and told us the remaining milk processors will keep price and non-price terms competitive,” ACCC deputy chairman Mick Keogh said.
“Ultimately, and on balance, we do not think this acquisition is likely to have the effect of substantially lessening competition.”
While Mondelez-Cadbury, Lactalis-Parmalat and a small Lion-owned fresh milk plant in Hobart will still operate in Tasmania, Mr Keogh warned Thursday’s decision did not set a precedent for future merger or takeover approvals.
“The ACCC acknowledges that there is a significant degree of concentration in the Tasmanian dairy sector,” Mr Keogh said.
“Any further consolidation of dairy processors would cause significant concern.”
Saputo, which operates a milk processing plant at Smithton in Tasmania’s northwest, will increase its market share to about 35 per cent with the acquisition of Lion’s facilities in Burnie and King Island as proposed.
The Canadian company will also add the South Cape, King Island Dairy and Tasmanian Heritage bands to an Australian stable that already includes Coon, Cracker Barrel, Devondale and Sungold, following the $1.3 billion purchase of Murray Goulburn last year.
Mr Keogh said the ACCC also examined the impact the sale by Kirin-owned Lion would have on the supply of cheese in Australia.
“Lion focuses on premium speciality cheeses and Saputo focuses on everyday cheeses,” he said.
“We considered that a combined Saputo-Lion would face continued competition from domestic cheese producers, supermarket private labels, and cheese importers.”