Murray Goulburn Co-operative Co Ltd - proposed acquisition of assets and shares of Australian Co-operative Foods Limited (Dairy Farmers)

Summary

Murray Goulburn proposes to acquire:
- 100% of Dairy Farmers' cheese and ingredients business; and
- Dairy Farmers shares equivalent to at least 20% (but less than 50%) of the total shares on issue on a fully diluted basis.

Murray Goulburn also proposes to enter into a milk supply arrangement with Dairy Farmers Milk Co-operative (DFMC). Under this arrangement, DFMC will supply milk sourced in South Australia, Victoria and Southern NSW to Murray Goulburn for on-supply to Dairy Farmers. The remaining milk sourced in mid and northern NSW and Queensland will be supplied directly to Dairy Farmers, consistent with current arrangements.

Market definition

The ACCC considered the acquisition in the context of the national wholesale market for UHT white milk and the national wholesale market for cheese, as well as regional markets in Victoria (including parts of southern NSW) and South Australia for the acquisition of raw milk.

Competition analysis

The ACCC formed the view that the proposed acquisition would be unlikely to substantially lessen competition in the relevant markets. In a number of markets there was no, or very limited, overlap between the activities of Murray Goulburn and Dairy Farmers. In other markets the ACCC considered that the merged entity would be constrained by the presence of existing competitors and the threat of expansion by these competitors.

Specifically, in relation to the national market for cheese, the ACCC considered that actual and potential import competition and the ability of Australian exporters of cheese to redirect their product to the domestic market were likely to impose a competitive constraint on the merged entity.

In relation to the national wholesale market for UHT white milk, the ACCC also considered that actual and potential competition from importers of UHT white milk was likely to impose some additional competitive constraint.