Muller's acquisition of Dairy Crest's liquid milk business appeared to move a step closer yesterday (11 August) when the UK's competition regulator indicated it is proposing to accept the German giant's moves to assuage anti-trust concerns.
The Competition and Markets Authority had flagged a number of competition concerns tha it believed would arise from the deal, which would effectively leave two major, nationwide milk suppliers in the UK – Muller and Arla Foods.
To address these concerns – and avoid a more detailed investigation – Muller said it would undertake to "toll process" a nominated volume of fresh liquid milk. The company is in negotiations with two companies: Medina Holdings and Nijjar Group Holdings, trading as Freshways.
"The CMA proposes to accept the proposed undertaking, which it currently considers is appropriate to remedy its competition concerns," the regulator said yesterday afternoon.
Before delivering its final decision, however, the CMA has invited third-party comment on the "suitability" of the two companies as "effective competitors to Muller" in the supply of fresh milk to national retailers in the Severnside catchment area. The deadline for comment is 25 August.
Dairy Crest hopes to offload its struggling dairies division to focus on its more profitable spreads and cheese business. Commenting on the CMA's statement, Dairy Crest CEO Mark Allen said the company believes the deal will be "good news" for the whole UK dairy sector, which he said is "currently facing significant challenges arising from low dairy commodity returns".
Allen continued: "It will deliver economies of scale and cost efficiencies that will underpin investment and help the UK compete more successfully in global markets. Today's announcement that the CMA proposes to accept Muller's undertakings is a positive step forward."
The CMA extended its timetable for reaching a decision on the deal from 21 August to 19 October. Allen stressed even with this "extended timetable" Dairy Crest still expects to complete the sale in 2015.