File image. Photo: RNZ / Cole Eastham-Farrelly
- ACCC not opposed to Lactalis buying Fonterra's Mainland Group
- Australian regulator says an acquisition is unlikely to result in substantial lessening of competition
- Any deal is still hypothetical as Fonterra is yet to make a formal announcement
Australia's competition regulator will not oppose a move by French dairy giant Lactalis to acquire Fonterra's consumer, dairy ingredients and food services businesses.
Lactalis lodged an informal merger clearance application with the Australian Competition and Consumer Commission (ACCC) earlier this year.
ACCC deputy chair Mick Keogh said it reviewed the potential transaction "very closely" as it would combine two of the biggest buyers of raw milk in Victoria, and may lead to further consolidation in Tasmania.
"While we acknowledge the concerns raised by some representative bodies, after careful consideration we have determined that the acquisition is unlikely to result in a substantial lessening of competition," he said.
The ACCC said alternative buyers of raw milk would be found in Victoria.
"We found that while the industry in Tasmania is already concentrated, Lactalis has a limited presence and the acquisition would not substantially alter the market dynamics. If the acquisition proceeded, Lactalis would continue to be constrained by Saputo and, to a lesser extent, Mondelez," Keogh said.
The ACCC also said a deal was unlikely to substantially lessen competition in wholesale dairy supply, such as drinking milk, cream, cheese, spreads and ingredients like milk powder.
Australia's Bega Cheese - backed by billionaire Andrew Forrest - has also made contact with the ACCC over a potential deal.
Keogh said the ACCC has not received contact from any other potential bidders.
Forsyth Barr senior analyst Matt Montgomerie said Lactalis appeared to be the front-runner for Mainland Group, but the ACCC announcement was not an indication of whether Fonterra would accept Lactalis' bid.
"News flow from other interested parties rumoured over recent months (Meiji, American private equity, Saputo and Bega) has been quiet," Montgomerie said.
