By Darren Gray
The Australian Competition and Consumer Commission has expressed concerns about the proposed purchase of dairy processor Murray Goulburn by Canadian company Saputo, saying it could lead to lower payments to farmers in western Victoria for their milk.
The competition regulator is concerned Murray Goulburn's deal with Canadian Saputo could lead to lower prices for farmers. Credit: Steve Hynes
In a much anticipated statement released on Thursday, the ACCC said it was concerned the deal would lessen competition for milk, and see one company own about two thirds of the milk processing capacity in south west Victoria.
That situation meant the processors would be more likely to offer lower prices to farmers as many dairy farmers would have "limited alternatives," it warned.
“We are concerned this transaction would ultimately lead to lower prices being paid to dairy farmers in the region," ACCC chairman Rod Sims said.
The ACCC's statements are bound to raise concerns among farmers that the proposed deal could be at risk. But the ACCC's statements might be more of a temporary roadblock to a deal than a permanent barrier, because the regulator specified its concerns related "solely" to MG's Koroit plant.
The ACCC said that if Saputo did not acquire the Koroit plant it would likely be bought by another dairy player and kept operating.
In an interview with Fairfax Media Mr Sims said the ACCC's stance was "all about making sure the farmers have got competition to buy their milk".
With Saputo (via its plant at Allansford) and Murray Goulburn (via its Koroit plant) now controlling more than two-thirds of the region's milk supply, the proposed Saputo/Murray Goulburn union would make such a player "dominant in terms of price and dominant in terms of their ability to dictate to farmers how and what they do," Mr Sims said.
"So these are serious concerns. And to jump to the bottom line, if they want to proceed with the transaction and basically pick up 70 per cent of Murray Goulburn they can do that, we're clearing that, but that means letting go of Koroit," he said.
Asked if there was a way that the deal could go ahead with the Koroit plant still in the transaction, Mr Sims said: "As things sit at the moment, I'd say no."
In a statement Saputo said the ACCC had outlined its "preliminary views" on competition issues relating to the deal and had not made a final decision.
"Saputo will carefully review the ACCC's statement of issues and will continue to work closely with Murray Goulburn and the ACCC with a view to securing ACCC approval as soon as practicable," Saputo said.
Murray Goulburn said in a statement it would "continue to work closely with Saputo and the ACCC to be able to achieve completion" of the deal.
"MG believes that a successful transaction with Saputo is the best outcome for MG’s stakeholders and we have received support from suppliers and shareholders regarding the security and certainty this transaction will deliver," MG said.
Adam Jenkins, president of the United Dairyfarmers of Victoria, said he believed most MG farmer suppliers would want the proposed deal to proceed.
"I can understand their (the ACCC) concerns around the south western milk pool and the lack of competition. However, I do think that farmers are looking for certainty and clarity around this deal, and they are pushing for it to go through,'' he said.
Mr Jenkins said if the deal did not go ahead, Murray Goulburn's financial position might leave it unable to pay a competitive milk price to farmers.
In an interview with Fairfax Media two weeks ago the chief executive of Saputo, Lino Saputo Jnr, said he had observed strong backing among dairy farmers for the proposed deal.
Murray Goulburn stunned many of the dairy farmers who supply it with milk when it announced in late October 2017 that it had reached an agreement with Saputo to sell the company to Saputo for $1.31 billion on the day of its annual general meeting.