Muller milk deal referred to CMA
Plans by Germany's Muller to swallow up an £80 million portion of Britain's milk market have been referred to the UK's competition authority in what is described as a "positive" move following European scrutiny.
The planned deal, announced in November, will see subsidiary Muller Wiseman buy Dairy Crest's struggling dairy operations, meaning it controls about a quarter of milk produced in the UK.
Dairy Crest today said that "following constructive talks with the European Commission" the deal had now been referred back to the UK for review by the Competition and Markets Authority (CMA).
It added that the transaction, which has already been approved by its shareholders, remained "on track".
The deal will leave the UK milk market in the hands of three major firms: global dairy co-operative Arla; Glasgow-based First Milk - also owned by farmers; and Muller, which bought Glasgow's Robert Wiseman Dairies for £100 million in 2012.
Analysts say it should provide some relief to hard-pressed dairy farmers, and it has been welcomed by the National Farmers' Union.
Dairy Crest chief executive Mark Allen said today: "This transaction will be a positive development for both Dairy Crest and the UK dairy industry as a whole, delivering economies of scale that will help create a more sustainable UK dairy sector that is better placed to compete on the global stage.
"It has always been our preference for the transaction to be reviewed in the UK, so we welcome this referral back to the CMA as a positive step. We will work with Muller and the CMA to progress the merger review as quickly as possible."
The move will allow Dairy Crest to focus on its cheese and spread operations, which include leading brands such as Cathedral City, Clover and Country Life.
Dairy Crest's dairy operations process and deliver around 1.3 billion litres of milk a year to retailers, coffee shops, hospitals and residential customers.
They recorded revenues of £944.8 million in the year to the end of March and underlying profits of £600,000.
But half-year results released in November showed the division slipping to a loss of £4.4 million in the six months to the end of September amid falling market prices which had "now led to difficult milk price cuts for British dairy farmers".
The sale includes factories in Foston, Chadwell Heath and Severnside as well as the Hanworth glass bottling site, where Dairy Crest had already been consulting with employees about the site's future. It also includes flavoured milk brand Frijj.
Muller has said the combination will lead to production efficiencies and unlock the potential for higher levels of innovation, product development and greater exports of dairy products made in Britain.
Analysts at Shore Capital said the referral to the CMA was expected.
They said: "There remains some water to flow under the bridge for this important proposed deal to be cleared but shareholders in Dairy Crest will no doubt welcome this procedural development and with cautious optimism hope for a successful conclusion from the CMA.
"We see this proposed deal as an important and good one, not just for Dairy Crest but also the whole dairy farming and processing industries in Great Britain.
"Put another way, if it did not go through we would be concerned about the ongoing stability of the liquid milk industry and the farmers that supply it."