£80 million milk deal faces in-depth probe

The Competition and Markets Authority (CMA) has revealed that it is referring Müller UK & Ireland's proposed acquisition of Dairy Crest's dairy operations to a phase two assessment. The CMA will continue to investigate plans for the proposed acquisition before making a final decision.

The planned deal, announced in November, will see Shropshire-based subsidiary Müller Wiseman buy Dairy Crest's struggling dairy operations.

It includes Dairy Crest's dairy facilities at Severnside, Chadwell Heath, Foston and Hanworth together with around 70 depots.

This would give Müller, whose Shropshire arm is in Market Drayton, control over about a quarter of milk produced in the UK.

The deal will leave the UK milk market in the hands of three major firms: global dairy co-operative Arla, Glasgow-based First Milk, and Müller, which bought Glasgow's Robert Wiseman Dairies for £100 million in 2012.

Müller bosses say the investigation is an expected development given the scale of the acquisition and will take approximately six months to complete.

Ronald Kers, chief executive of Müller Group, said: "It was our expectation that the CMA might wish to examine our proposed acquisition in detail and we look forward to working with them to supply the information required and to achieving a positive outcome.

"The rationale for this transaction is perhaps even stronger now given the mounting challenges facing the UK fresh milk sector and we remain convinced of the need to increase our competitiveness, ensuring that customers continue to receive a quality product at a low price, whilst continuing to pay farmers fairly.

"We can achieve this by bringing Müller Wiseman Dairies and Dairy Crest's dairy operation together leading to better efficiencies. This will give us the means to unlock higher levels of investment, category insight and product development, which is badly needed in the fresh milk aisle."

Sheldon Mills, CMA senior director of mergers and decision-maker in this case, said: "The CMA is aware of the very significant challenges the UK dairy sector is currently facing.

"These challenges are recognised in the framework which we used to assess the merger. However, the CMA found that the transaction may nevertheless give rise to competition concerns, since it removes the rivalry between the two main suppliers of fresh milk to major grocery retailers in certain parts of Great Britain.

"Unless the businesses offer undertakings that resolve the competition concerns, this transaction will face an in-depth investigation to ensure that the merger of two of the largest UK dairy companies will not result in higher prices for national grocery retailers and, ultimately, for consumers."