ACCC green light for MG sale but Koroit concerns remain

The Australian Competition and Consumer Commission (ACCC) has insisted Saputo sell MG’s Koroit plant, “within a prescribed timeframe,” to a purchaser the watchdog approves.

The ACCC has also sought a binding undertaking Saputo will supply a guaranteed volume of milk to the prospective purchaser, for a specified time.

It has also insisted Saputo must allow farmers who want to transfer their milk to Koroit’s new owner to do so.

The ACCC raised concerns Saputo’s ownership of south west Victoria’s two largest plants, Allansford, near Warrnambool, and Koroit would have substantially lessened competition and lowered farmgate milk prices.

Saputo’s plan to sell Koroit remedied competition concerns, ACCC chairman Rod Sims said.

“The undertaking creates an opportunity for a viable competing milk processor to enter or expand in the local region,” Mr Sims said. 

“When approving a new owner of Koroit, we will focus on its ability to be a strong and effective competitor for raw milk in the region.”

But farmers continued to blast the decision to force Saputo to sell Koroit.

Naringal MG supplier Hayden Ballinger said he couldn’t understand how the sale of Koroit to another processor would work.

“I can see what the ACCC is trying to do,” Mr Ballinger said.

‘They are providing a third processor to make it more competitive for farmers, but I hope it doesn’t weaken that third processor, so they end up unviable,” Mr Ballinger said.

“They may undo exactly what they are trying to protect.”

Crossley MG supplier Karinjeet Singh-Mahil said she had concerns about the sale timeframe.

She described the ACCC’s approach, in citing competition concerns, as a “flawed philosophy.

“Koroit is part of an integrated system and its sale will have an impact on the whole system,” Ms Singh-Mahil said.

“It’s like saying we are going to cut off an arm, but somehow say it’s still a whole human body.

“It shows an absolute lack of understanding, by the ACCC, and refusal to understand how the dairy industry works.”

Saputo’s Allansford plant was full, while Koroit was running under capacity.

“It’s going to be very hard for a new owner to survive and it puts the prospective purchaser under an enormous amount of pressure.”

WCB supplier Chris McKenzie, Timboon, said he was pleased with the ACCC decision.

“Farmers are wanting a clear direction, they want to know what’s going on,” Mr McKenzie said.

He still believed Saputo should have been able to retain Koroit.

“I think there’s still plenty of competition in the west, regardless,” he said.

There were only a limited number of processors who might be interested in Koroit, he said

“Let’s face it, there’s a factory at Rochester sitting there doing nothing.”

Woolsthorpe MG supplier Bernard Free said the decision to force Saputo to divest Koroit was “typical of government bureaucrats, with no idea of reality.

He said the ACCC had tried to claim there was a lack of competition, within the south-west.

“They are trying to tell us WCB is a competitor when Allansford is full and can’t take any more milk,” Mr Free said.

“Where’s the competition, in that?”

He questioned who would supply Koroit’s new owner.

“Nobody wants to buy dairy farms, no-one wants to expand, because nobody can make any money,” Mr Free said.

“Stainless steel (processing plants) are no good without milk, and Koroit doesn’t have milk.”

Mr Free said he believed the ACCC was following the letter of the law.

“The letter of the law says when you go down from three processors to two, you need to stick your nose in,” he said.

“Being a government department, they have stuck their nose in and given us their two bob’s worth, but they haven’t listened to the farmers.”

His other concern was the new owner of Koroit would have to pay more, to secure milk, “which means they are going to go broke.”

Mr Sims said the ACCC had carefully considered responses from a broad range of market participants about Saputo’s undertaking and the broader sale. 

“We heard from and spoke with many farmers who expressed concerns with the ACCC intervening in this transaction in the short term because they wanted certainty and stability after a bumpy ride with Murray Goulburn,” Mr Sims said.

“I want to assure them that our aim is to put in place an outcome that works in their best interest by promoting competition in the medium to longer term while minimising short-term uncertainty,” Mr Sims said.

MG confirmed Saputo divesting Koroit would not have an impact on the terms of its s asset sale to Saputo.

Saputo chief executive Lino Saputo said the company was very pleased with the decision.

“This is an important milestone in the process of completing our acquisition of MG,” Mr Saputo said.

“We now await the Foreign Investment Review Board’s (FIRB) decision and the results of the MG shareholder vote.”

He said he remained confident the transaction would be completed by May 1.

“Our goal remains to continue to invest in Australia with a long-term perspective and ensure we have a strong and sustainable dairy industry.”

The Australian Competition and Consumer Commission (ACCC) made the announcement, prior to tomorrow’s MG extraordinary general meeting.

Shareholders and farmers are expected to approve the sale, at the EGM.