South African dairy processor Clover Industries has had its bid to buy the yoghurt and milk operations of local rival DairyBelle approved by competition officials – with a condition.
Clearing a deal announced in May, the country’s Competition Commission has ordered Clover to put on hold plans to end a yoghurt distribution agreement with Danone.
In September last year, Clover said it would not renew contracts to supply ingredients, package custard and distribute products for the French dairy group.
The majority of the agreements were due to expire at the end of this year. However, the competition watchdog said today (16 October) Clover should retain the distribution contract until next June.
“The Commission ascertained that Clover’s decision to stop supplying Danone with secondary distribution services would lead to anti-competitive outcomes and negative effect on employment. The Commission established that Danone would not be able to replace the services provided by Clover within a reasonable period,” the watchdog said.
Deputy commissioner Hardin Ratshisusu added: “In the main, the recommended conditions are intended to address the potential negative impact of the merger on employment as well the ability of Danone to compete in the yoghurt market.”
Ruling on the Dairybelle acquisition, the watchdog said it had received “varied concerns” from South African farmers about the impact Clover’s acquistion of the Dairybelle assets could have on the procurement of raw milk. However, it argued the deal was “unlikely to result in the change of current market dynamics”.
The Commission said there would be “no anti-competitive effects” on South Africa’s UHT milk sector.