Australia’s competition watchdog has raised concerns about Saputo’s proposed acquisition of the speciality cheese business of Lion Dairy & Drinks.
Canadian dairy company Saputo already owns a milk processing plant in Tasmania and it proposes to acquire Lion’s Tasmanian cheese processing plants, located in Burnie and King Island, as well as its cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.
The proposed acquisition would combine processing plants of the second and third biggest buyers of raw milk in Tasmania, which currently compete separately with the biggest buyer, Fonterra.
“We are concerned that combining these two operators may lead to Tasmanian dairy farmers being paid lower prices for their raw milk,” said Mick Keogh, deputy chair of the Australia Competition & Consumer Commission (ACCC).
“If Saputo acquires the Burnie and King Island Lion plants, we will be left with a structure where two companies, Fonterra and Saputo, buy more than 80% of the raw milk produced in Tasmania.”
Keogh added: “Each would have a market share several times bigger than the next largest buyer of raw milk, Mondelez-Cadbury.”
Montréal-based Saputo announced in April plans to buy the speciality cheese business of Lion Dairy & Drinks, a unit of Kirin Holdings, in a deal worth AUD 280 million ($189.8 million).
The ACCC has also examined the impact of the proposed acquisition on the supply of cheese in Australia. Saputo’s cheese brands include Coon, Sungold and Devondale. The ACCC’s preliminary view is that the acquisition is unlikely to raise competition concerns in this area.
Keogh said: “Lion focuses on premium speciality cheeses, and Saputo focuses on everyday cheeses. Our initial analysis suggests that a combined Saputo-Lion would face continued competition from a range of suppliers, including domestic cheese producers, supermarket private labels and cheese importers.”
Saputo last year successfully completed the $1 billion purchase of Australian dairy Murray Goulburn.
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