Müller moves to alleviate UK competition concerns over Dairy Crest acquisition

28-Jun-2015 - Last updated on 29-Jun-2015 at 15:46 GMT

The UK Competition and Markets Authority (CMA) has "in principle" accepted a proposal that would reduce competition concerns and allow Müller to acquire Dairy Crest's fresh milk business.

An initial Competition and Markets Authority (CMA) assessment of the proposed acquisition concluded that Müller and Dairy Crest were the two main suppliers of fresh milk in some regions of the UK.

This, CMA said on June 12, "gives rise to a realistic prospect of substantial lessening of competition in the supply of fresh milk."

It said the deal would be referred for an in-depth six-month 'phase two' investigation unless "acceptable undertakings to address these competition concerns" were offered.

CMA is now, however, considering an offer by Müller to process a certain volume of fresh milk for a third party dairy processor in South West England and Wales.

“The purpose of the undertakings is to replace the competition provided by Dairy Crest that would be lost if the acquisition went ahead and provide national multiples with an alternative to Müller in certain regions," CMA said late last week.

It added that there are "reasonable grounds for believing that the proposed undertakings, or a modified version of them, might be accepted by the CMA instead of a more detailed phase two merger investigation."

Credible competitor?

Müller must now "propose a named processor and draft arrangement to the CMA for approval."

CMA will have final say on the terms of supply, including the milk price mechanism, and decide if the chosen third party is a "credible competitor."

It has until August 21 to accept the proposed undertakings or a modified version, and may extend the deadline by 40 working days if it sees fit.

If not accepted, the acquisition will be referred for a phase two CMA investigation.

But if approved, Müller aims to complete the transaction by the end of the year at the latest.

“We are pleased that the CMA has responded promptly to our proposals which aim to fully address the concerns which they expressed and look forward to a positive outcome,” said Ronald Kers, CEO, Müller Group.

Mark Allen, CEO, Dairy Crest, welcomed the "potential for swifter completion."

“We will continue to work with Müller and the CMA to help the sale go through,” said Allen.