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Fonterra cleared to buy NZ Dairies, expand southern presence

BUSINESSDESK: Fonterra has been given anti-trust approval to buy the south Canterbury milk processing assets of New Zealand Dairies, the Russian-owned company that went into receivership in May.

"Comparing the acquisition by Fonterra to the scenario where another bidder would acquire NZDL's assets, the commission is satisfied that the acquisition would not be likely to result in a substantial lessening of competition," Commerce Commission chairman Mark Berry says.

Fonterra agreed to buy the plant out of receivership in June after NZ Dairies' Russian parent Nutritek was declared bankrupt earlier in the year.

Nutritek was set up in 1990, with operations in Russia and the Ukraine before it expanded its footprint into New Zealand. No price has been disclosed.

The commission today says it is satisfied that Fonterra co-operative structure, the regulatory environment and national raw milk pricing strategy "removes Fonterra's incentive and ability to depress the prices it pays farmers for raw milk in the south Canterbury and north Otago regions".

The NZ Dairies plant at Studholme, near Waimate, produces milk powder for export and its export focus meant the commission "has not had to consider downstream markets in New Zealand for dairy products such as butter and cheese in this instance".

The sale has attracted some controversy, with one un-identified bidder claiming to have offered a better deal than Fonterra.

The sale process had put "significant pressure" on suppliers to accept the Fonterra proposal, that party said in a confidential submission on Fonterra's application to buy the assets.

Comments and questions
6

The only sensible solution has been arrived at.

That is if you are a communist and don't support an open and free market without monopolies.

I take the opposite view and believe that Fonterra should have not received approval - it would have been better if Synlait was encoraged to buy the plant rather than Fonterra paying a ridiculous price to stymie opposition to its monopoly. Fonterra can afford to pay over the top and that extra cost can be hidden in the balance sheet.

I have no issues with Fonterra - they are a great company but increasing their monopoly is a bad thing for farmers and NZ Inc

Was ComCom told to turn another blind eye. Seems to be two sets of rules. Im with the Doctor.

Increase in dairy prices on the way! I can't for the life of me see how this deal is not anti-competitive. For once I also agree with the doctor.

There is merit in Fonterra broading its income base; however not at the expense of the NZ consumer.

Dairy prices should be at least in line with Aussie prices, but they're not.

What are you guys at the Commerce Commission doing. Your delay in not policing these prices gougers is having the effect of taxing whats left of the middle class and compromising the health of poor classes' children...

My guess is the banks are lobbying like hell to keep the milk prices high also. They want to protect the scale of interest they have in dairy mortgages.

".....the commission is satisfied that the acquisition would not be likely to result in a substantial lessening of competition," Commerce Commission chairman Mark Berry says.

Yep! Can't argue with that, given there was so little competition before the acquisition, it's easy to believe there will be no "substantial lessening" now!!