Dairy Crest sale could be approved by October

By Lynda Searby

- Last updated on GMT

The CMA could still change its mind about giving the go-ahead, according to City analysts
The CMA could still change its mind about giving the go-ahead, according to City analysts

Related tags: Dairy crest, Milk

Müller is one step closer to concluding its deal with Dairy Crest, following the Competition and Markets Authority’s (CMA’s) announcement that it agrees with Müller’s proposals for alleviating anti-competition concerns.

The CMA proposes to accept the proposed undertaking, which it currently considers is appropriate to remedy its competition concerns,​ said the regulator in a notice posted on its website.

Dairy Crest first revealed its plan to sell its loss-making dairy division to Müller UK and Ireland in November 2014.

The sale covered its fresh liquid milk, flavoured milk, bulk and potted cream, bulk butter and milk powder businesses. Also included in the £80M deal were Dairy Crest’s dairy facilities at Severnside, Chadwell Heath, Foston and Hanworth, plus about 70 depots.

Referred to the CMA

Due to the scale of the deal in March​ 2015, it was referred to the CMA. To avoid a lengthy merger investigation, Müller was given the opportunity to suggest acceptable remedies to the CMA’s concerns.

Müller’s solution was to agree to process a certain volume of fresh liquid milk for a nominated purchaser in the south west or Wales. This would allow the purchaser – likely to be either Freshways or Medina – to compete for tenders in the south west, Wales, the south and the midlands.

On June 12, the CMA announced that it would consider this solution, triggering a process which included a 15-day public consultation, with a final decision to be announced after a total of 40 working days.

Yesterday (August 11), the CMA announced its intention to accept Müller’s proposal, but said that before reaching a final decision, there would be a further two-week consultation period.

This was to give third parties a further chance to comment on Müller’s proposed undertakings, as well as on the suitability of the two potential purchasers as effective competitors to Müller in the supply of fresh milk to national multiples in the Severnside catchment​.

Deadline for response

Whilst the deadline for responses is August 25, the CMA also said that it was extending the deadline for consideration of the proposed undertakings by up to 40 working days until October 19, although it might reach a decision earlier than this date.

A spokeswoman for Müller told FoodManufacture.co.uk: We are comfortable that the CMA process is progressing and not seeking to add further comment at this time.

Clive Black, analyst with Shore Capital, said he believed the CMA’s web announcement was fundamentally good news for Dairy Crest, ​although he pointed out that there is scope for the CMA to change its mind.

He also questioned the need for a further 40 days of consultation, as this further dragged out the uncertainty for the employees affected, and meant that the original terms agreed between Dairy Crest and Müller would probably have to be adjusted.

“Trading conditions in the UK liquid milk market have clearly been challenging and so we would not be surprised to see some sort of amended terms,”​ he said.

Related topics: Dairy

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