ACCC approves Saputo’s proposal to acquire Lion’s cheese business

The Australian Competition and Consumer Commission (ACCC) has approved Saputo Dairy Australia’s proposal to acquire Lion Dairy & Drinks’ cheese business in Tasmania.

In April, Saputo signed an agreement to acquire the speciality cheese business of Lion-Dairy & Drinks in Australia for A$280m ($197m).

Under the agreement, Saputo proposes to acquire Lion’s cheese processing plants, located in Burnie and King Island, as well as cheese brands such as South Cape, King Island Dairy and Tasmanian Heritage.

Prior to announcing its decision, ACCC carried out an investigation to examine if the deal could impact the competition in the market as Saputo currently operates a milk powder processing plant in Smithton, Tasmania.

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.

“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.”

In Tasmania, Fonterra is reported to be the largest purchaser of raw milk and Saputo is its closest competitor in the region.

Other milk processors in Tasmania include Mondelez-Cadbury, Lactalis-Parmalat and a small fresh-milk plant in Hobart, which will be retained by Lion.

Keogh added that the ACCC does not think the acquisition will lessen competition and acknowledged there is a significant degree of concentration in the Tasmanian dairy sector.

Additionally, the authority said it has examined the deal impact on the supply of cheese products in the country and concluded that it would not significantly affect the competition in the supply of cheese.

Last month, ACCC raised competition concerns over Canadian dairy firm Saputo’s proposed acquisition of Lion Dairy & Drinks’ cheese business.