Australia’s competition watchdog has given the green light to China Mengniu Dairy Company’s previously-announced purchase of local business Lion Dairy & Drinks.

The Australian Competition and Consumer Commission (ACCC) said today (21 February) it “will not oppose” the deal after “closely considering the potential impact on competition”.

Last November, it was announced Lion Dairy & Drinks, part of the Australian food and drinks business owned by Japan’s Kirin Holdings, was to be sold to China Mengniu for AUD600m (US$407.5m then), pending ACCC approval.

The ACCC said it examined whether the acquisition would have an impact on competition for the purchase of raw milk from dairy farmers in the Gippsland region, located in the state of Victoria. It pointed out that Gippsland is the only area with processing facilities owned by both Lion Dairy and China Mengniu.

ACCC added that China Mengniu, through a subsidiary, has an indirect interest in Burra Foods, which has an existing raw milk processing facility located at Korumburra, Victoria.

“While Burra and Lion D&D compete for the acquisition of raw milk, they are not close competitors, and our investigations concluded that dairy farmers are unlikely to switch between the two,” ACCC deputy chair Mick Keogh said.

He continued: “The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion D&D combined acquiring less than 25% 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.”

The ACCC said it also found there was “considerable spare processing capacity” at other milk processors in Gippsland, giving farmers “alternative potential buyers” for their milk.

Lion Dairy & Drinks operates 13 manufacturing facilities and produces milk-based beverages, yogurt, white milk and plant-based products. It owns brands such as Pura milk and Dare iced-coffee. 

In January, China Mengniu struck a deal to buy 5% of Shanghai Ground Foods Tech Co., also known as Ground Food and which owns Perth-based Brownes Dairy. And last year, the Chinese dairy firm acquired Australia-based infant-formula maker Bellamy’s Australia.