CMA approves Dairy Crest disposal to Muller

19th Oct 2015 15:13

(ShareCast News) - Dairy Crest's disposal of its dairy business to Germany's Müller has been given the green light by the UK competition regulator.The Competition and Markets Authority (CMA) accepted remedies suggested by Müller to resolve competition concerns and said that the deal, which was first announced almost a year ago, was good for the industry and would not hurt milk prices.Müller agreed to expand existing supplies of fresh liquid milk to national grocery retailers in the South West and Wales, which was a chief concern of the watchdog since it began investigating the deal in March.Sheldon Mills, CMA senior director of mergers, said: "The dairy processing industry has faced a number of significant challenges in recent years and we believe that this outcome is good for the dairy industry and the retailers. The remedy addresses in a clear-cut manner the competition concerns we had with the merger in especially the South West and Wales regions."Müller has agreed to sell to Medina Dairy the option to require Müller to process up to 100m litres of milk each year in Dairy Crest's Severnside dairy for supply to national grocery retailers. The option is for a period of at least 5, and up to 8, years.The CMA said this resulted in the accelerated entry of a new competitor in the industry, which has the necessary financial backing and capability to succeed in serving large national retailers."We consulted extensively and found widespread backing in the industry for this solution," Mills said."Resolving this merger investigation now brings real benefits to the dairy industry, including farmers, as it provides certainty and allows the businesses involved and their customers to focus on bringing British dairy products to consumers at a competitive price."Having sold this unit, Dairy Crest will be focused on its cheeses and spreads business and City analysts suggest it could become a takeover target.Recent first quarter results showed total sales of its four key brands, Cathedral City, Clover, Country Life and Frylight, were in line with the same period of last year, but profits in the first half are now expected would be lower before an expected second half improvement.