Australia’s competition watchdog has give its approval for the acquisition by Canadian dairy company Saputo of the Lion speciality cheese business owned by a subsidiary of Japan’s Kirin Holdings.

The Australian Competition & Consumer Commission (ACCC) said it has decided it will not oppose the proposed deal of the Tasmanian-based cheese business by Saputo Dairy Australia.

Saputo is proposing to acquire Lion’s cheese processing plants, located in Burnie and King Island, Tasmania, and Lion’s cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.

Saputo has an existing milk powder processing plant in Smithton, Tasmania. The ACCC’s investigation included a detailed examination of the impact this deal would have on competition for the acquisition of raw milk.

Fonterra is the largest buyer of raw milk and Saputo’s closest competitor in Tasmania.  Other processors include Lactalis-Parmalat and a small fresh-milk plant in Hobart that Lion will retain.

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.” 

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“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.”

“Ultimately, and on balance, we do not think this acquisition is likely to have the effect of substantially lessening competition.”

“However, the ACCC acknowledges that there is a significant degree of concentration in the Tasmanian dairy sector. Any further consolidation of dairy processors would cause significant concern.”  

The ACCC also examined the impact of the proposed acquisition on the supply of cheese in Australia.

Saputo’s cheese brands include Coon, Sungold and Devondale and Lion’s cheese brands include South Cape, King Island Dairy and Tasmanian Heritage. The ACCC determined that the proposed acquisition is unlikely to substantially lessen competition in the supply of cheese.

“Lion focuses on premium speciality cheeses and Saputo focuses on everyday cheeses. We considered that a combined Saputo-Lion would face continued competition from domestic cheese producers, supermarket private labels, and cheese importers,” Keogh said.

The ACCC had outlined its preliminary competition concerns in August.

Saputo emerged as the winning bidder for Lion’s cheese assets and its plants in April.