Dairy Crest agreed to sell its loss-making dairies to Müller UK and Ireland Group in November last year.
The deal was referred to the Competition and Markets Authority (CMA) in March, after fears were raised about a loss of competition in certain areas of the UK.
Earlier this month, the CMA announced it would carry out an “in-depth investigation” into the sale, unless Müller could address the competition concerns.
In response to the CMA, Müller offered to supply a certain volume of fresh milk to a third-party processor, the CMA said.
“This arrangement is to enable another processor to compete to supply national multiples in those regions,” it said.
‘Enable another processor to compete’
Supplying a third-party processor with milk would replace the competition provided by Dairy Crest, which would be lost if the acquisition went ahead. It would also provide the multiples with an alternative to Müller, the CMA added.
What the analysts said:
Clive Black and Darren Shirley: “Encouragingly for all parties involved in the proposed merger, in our view, the CMA believes that the ‘proposed undertaking is capable of remedying the concerns identified in its original decision and as such is satisfied a phase two investigation need not proceed.”
“The CMA considers that the proposed undertaking is capable of remedying the concerns identified in the decision,” it said.
“The CMA has decided that there are reasonable grounds for believing that the proposed undertakings, or a modified version of them, might be accepted instead of a more detailed investigation.”
It could take the CMA up until August 21 to accept or reject Müller’s proposal, it said.
If the sale goes ahead, Müller will acquire Dairy Crest’s fresh liquid milk, flavoured milk – including the FRijj brand – bulk and potted cream, bulk butter and milk powder businesses.
The firm’s Severnside, Chadwell Heath, Foston and Hanworth facilities will be included in the deal, plus 70 depots.
Growing branded cheese
Dairy Crest chief executive Mark Allen said the deal would allow the firm to focus on growing its branded cheese and spreads business, while delivering additional added value sales through its whey investment.
“We have always believed in the sale of our dairies operations is good news for the whole of the UK dairy sector at a time when it faces significant challenges,” he said.
“We welcome the developments and the potential for a swifter completion. We will continue to work with Müller and the CMA to help the sale go through.”
Shore Capital analysts Clive Black and Darren Shirley believed the deal could only be good for Müller and the liquid milk industry.
“Should this deal eventually go through, we believe that it will be a sound outcome for the sustainability of the liquid milk production in the UK and, so, the fortunes of British dairy farmers,” Black and Shirley said.