Lion takeover by Saputo worries ACCC

The ACCC has concerns about the impact on Tasmanian dairy farmers of Saputo’s proposed acquisition of Lion.

A King Island dairy farm.

The Australian Competition and Consumer Commission has flagged competition concerns about the proposed acquisition of Tasmanian-based dairy business Lion by Canadian dairy giant Saputo.

The acquisition would combine the processing plants of Tasmania’s second and third biggest raw milk buyers, which currently compete separately with the biggest buyer, Fonterra.

“We are concerned that combining these two operators may lead to Tasmanian dairy farmers being paid lower prices for their raw milk,” said ACCC deputy chair Mick Keogh.

“If Saputo acquires the Burnie and King Island Lion plants, we will be left with a structure where two companies, Fonterra and Saputo, buy more than 80 per cent of the raw milk produced in Tasmania.

“Each would have a market share several times bigger than the next largest buyer of raw milk, Mondelez-Cadbury.”

Saputo, which owns a milk processing plant in Smithton, is proposing to acquire Lion’s Tasmanian cheese processing plants as well as it cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.

Lion, a unit of Kirin Holdings, has offered competitive contract terms, including better prices for winter milk and an option to fix the price of a percentage of their milk for up to three years.

However the ACCC is investigating whether these terms would be lost following the acquisition, the competition watchdog said in a statement of issues.

Saputo responded, saying it would carefully review the statement of issues and would continue to work closely with Lion and the ACCC with a view to securing approval as soon as possible.

The ACCC said its preliminary view was that the acquisition was unlikely to raise competition concerns in this area of cheese supply in Australia, with Saputo operating the Coon, Sungold and Devondale brands.

“Lion focuses on premium speciality cheeses, and Saputo focuses on everyday cheeses,” Mr Keogh said.

“Our initial analysis suggests that a combined Saputo-Lion would face continued competition from a range of suppliers, including domestic cheese producers, supermarket private labels, and cheese importers.”

The ACCC’s final decision on the proposed acquisition is scheduled for September 26.