Sector News

Dairy Crest’s dairies sale to Muller approved

October 20, 2015
Food & Drink

Muller UK & Ireland’s purchase of Dairy Crest’s dairies business has finally gained approval from the Competition and Markets Authority (CMA).

The £80m deal will complete by 27 December and includes Dairy Crest’s (DC) liquid milk processing, trading and distribution business, as well as its packaged cream, flavoured milk and bulk commodity ingredients business.

Plants at Severnside, Gloucester; Chadwell Heath, Essex; at Foston in Derbyshire and Hanworth, Middlesex, are part of the purchase, along with about 70 depots.

When the deal was first considered by the CMA it raised concerns about competition in fresh liquid milk supply in the catchment area of DC’s Severnside dairy, especially in the South West and Wales.

These have been addressed by Muller’s agreement to offer to contract process up to 100m litres of fresh liquid milk a year for Medina Dairy at the Severnside facility, for at least five and up to eight years.

Medina will then be able to offer this volume to national multiple tenders in the South West, Wales, the South and the Midlands.

Muller has withdrawn its right not to complete the purchase should profitability of Dairy Crest’s dairies fall below a certain level, while DC will make a one-off payment of £15m to Muller on completion to recognise the cost to Muller of the contract processing provision.

“This acquisition is very much in line with this mission and we are delighted that we can now press on, drive towards completion of this transaction and begin work with our new colleagues to bring these businesses together,” said Ronald Kers, chief executive of Unternehmensgruppe Theo Muller.

“There is no question that further consolidation is required in the UK fresh milk sector and with this hurdle now cleared, we have an exciting opportunity to create a more competitive, sustainable, efficient and innovative dairy processor in the UK.”

Muller UK & Ireland is wholly owned by the Muller Group, with 19 sites and employs almost 6,000 people across two business units: Muller Dairy and Muller Wiseman Dairies.

DC chief executive Mark Allen said this was a transformational moment for Dairy Crest and the wider dairy industry and would help to create a more sustainable UK dairy sector.

“It will deliver economies of scale and cost efficiencies that will underpin investment in the sector and help the UK to compete more successfully in global markets.

“Dairy Crest will now be able to focus on growth, through both our branded cheese and spreads operations and new revenue streams from manufacturing products for the fast-growing global infant formula market.”

The CMA said that it had approved Medina Dairy as purchaser following an extensive review of its business plans, existing dairy facilities, financial resources and strategy to supply retailers.

It said it was confident that, with its financial backing and experience, Medina Dairy was in a good position to begin supplying large retailers and continue investing in the area.

“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,” said Sheldon Mills, CMA senior director of mergers.

“The remedy addresses in a clear-cut manner the competition concerns we had with the merger in especially the South West and Wales regions.

“It results in the accelerated entry of a competitor, Medina Dairy, which has the necessary financial backing, commitment and capability to succeed in serving large national retailers.

“We consulted extensively and found widespread backing in the industry for this solution.”

Source: Farmers Weekly

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