The Competition & Markets Authority has sent more positive signals about Müller’s proposed acquisition of Dairy Crest’s liquid milk business.
The regulator said on Wednesday (30 September) it was set to accept modified undertakings offered by Müller to facilitate the £80m deal.
Müller offered in August to supply and process up to 100 million litres of fresh milk a year for a third-party processor at the Severnside dairy in Gloucestershire, in order to placate fears over a reduction in competition post-deal in the South West, and complete the deal for the loss-making Dairy Crest division.
But despite these proposals, it is understood some retailers still expressed concerns over the deal, leading the German dairy giant to submit modified undertakings, and prompting fears by some industry insiders the deal could be delayed or even scuppered.
However, the CMA said the modified undertakings had “further strengthened Müller’s offer”, and that it proposed to accept them, subject to comments from third parties.
The processor is offering to introduce a price adjustment mechanism to ensure that the per litre processing fee paid by the third party processor reflected any cost efficiencies achieved at the Severnside site.
Müller has also agreed to submit prices for ancillary services at Severnside for approval by the CMA, and for more robust firewalls to ensure competitively sensitive information does not flow between the third party and Müller.
The deadline for responses to the modified undertakings is 7 October, while the CMA has until 19 October to consider whether to accept them.
The announcement was welcomed by Dairy Crest CEO Mark Allen, who said the “transformational sale of our dairies operations is another step closer and remains on track to complete in 2015”.
Investec analyst Nicola Mallard said the sale of its liquid milk business would ensure Dairy Crest was a “simpler, focused food and ingredients operation [that] could prove attractive to others”. Its target price has risen from 554p to 636p per share, while its estimate of a take-out valuation could be closer to 750p.
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