ACCC seeks input on potential Saputo-Lion deal

Farmers, supermarkets, processors asked for input on Lion sale

Dairy
A DARE'LL FIX IT: Australia's corporate regulator is looking at the potential impact of the sale of Lion Dairy & Drinks to Saputo.

A DARE'LL FIX IT: Australia's corporate regulator is looking at the potential impact of the sale of Lion Dairy & Drinks to Saputo.

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ACCC wants to know if Lion deal will substantially lessen competition.

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Australia's corporate regulator is asking farmers, processors and supermarkets for their input into a potential acquisition of Lion Dairy & Drinks by Canadian dairy giant, Saputo Dairy Australia.

The Australian Competition and Consumer Commission wants to know if the plan will substantially lessen competition.

ACCC analyst Nicholas Wellfare said Saputo was proposing to acquire Lion D&D, including its 10 dairy-processing plants, various retail brands like Big M, Farmers Union, Dairy Farmers and other Australian assets.

In a letter to suppliers, the ACCC asks about milk production, dairy operations and which processor they supplied.

"What impact do you think Saputo acquiring Lion D&D will have on your business and the milk price you can obtain?," Mr Wellfare asked.

"Will it reduce the number of potential buyers of your raw milk?

"Could you supply to a processor that does not have a processing plant in your region?"

Federal treasurer Josh Frydenberg blocked the $600 million sale of Lion, which makes Pura milk, Dare iced coffee and Yoplait yoghurt to a Chinese company, deciding it was "contrary to the national interest".

Lion's owner, the Japanese beverage giant Kirin, announced its sale to China's Mengniu Dairy nearly 12 months ago.

Kirin released a statement announcing the deal was off.

"Lion notes that China Mengniu Dairy Company Limited has been awaiting the outcome of the Foreign Investment Review Board review of its proposed purchase of Lion Dairy & Drinks," the statement said.

"Given this approval is unlikely to be forthcoming at this time, Lion and Mengniu Dairy have mutually agreed to cease the current sale process.

"We are disappointed with this outcome and will now consider pathways forward in relation to the Lion Dairy & Drinks business."

A spokesman for Saputo said the company was consulting with the ACCC as part of its process "in considering making an offer for the LDD business."

United Dairyfarmers of Victoria president Paul Mumford said it was imperative that farmers who held concerns should contact the ACCC to give their views.

"Lion had a previous buyer, which was progressing well until the Treasurer recommended it not proceed," Mr Mumford said.

"Now it's important that, as an industry, we have milk processing capacity here, in Australia and we don't lose it completely."

He said he believed the ACCC would act on the concerns.

"It's extremely important the ACCC do their job appropriately, because we already have Saputo operating here, in Australia and its important we look at all aspects of any possible market dominance that may eventuate over time," he said.

"On the flip side, we need to make sure we can keep the capacity of Australian factories."

Mark Billing, Larpent, Vic, said the industry was in the "age of foreign ownership", after the demise of Murray Goulburn.

"So this is one of the things I think we could have seen coming," Mr Billing said.

"In my view if it strengthens the industry and makes processors more profitable, allowing processors to return some of that profit to the farmgate, I suppose that is a good thing.

"But it's got to go through all the processes the government proposes first."

Mr Billing said if processors were struggling, because they couldn't get milk, there would have to be some sort of rationalisation.

"Processors are part of the dairy chain, and they need to be successful, for us to be successful," he said.

"We just have to make sure that profits feed back to the farmgate."

Saputo needed to ensure it had a critical mass of milk, to make sure its factories were operating at their maximum capacity.

Doug Hanks, Stony Creek, in Gippsland, supplies the Australian Dairy Farmers Cooperative.

"I am yet to get the gist of how the government can decide who is allowed to buy what," he said.

"If was to sell my farm to a Chinese buyer, who wanted to pay $10 million more than someone else does, is the government going to pay me the $10 million (I lose) if they stop the sale?"

He said he didn't want to see foreign ownership, but it appeared Australian investors were not interested.

"I am a co-op man, through and through," he said.

"I would still be a co-op man today - if Norco were to come down here, I would join them, at the drop of a hat.

"If we don't want it, it's up to Lino (Saputo) isn't it?"

But he said he couldn't understand why Murray-Goulburn was blocked from taking over Warrnambool Cheese and Butter, in 2014, then Saputo had to sell its Koroit factory.

"If they let Saputo buy Murray Goulburn, why did they make Saputo sell Koroit?

"Why did they do that, if they are going to let him accumulate factories, in other places - it doesn't make sense."

A spokesman for Aldi declined to comment.

Coles, Woolworths and the Australian Dairy Products Federation have been contacted for comment.

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The story ACCC seeks input on potential Saputo-Lion deal first appeared on Stock & Land.

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