Friday, 07 September 2012 11:40

Fonterra cleared to buy NZDL

Written by Pamela Tipa

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Fonterra has gained Commerce Commission clearance to acquire the dairy processing assets of New Zealand Dairies Limited (in receivership). New Zealand Dairies processes raw milk at its Studholme factory near Waimate.

"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," says Commerce Commission chair Dr Mark Berry.

"The commission also considers Fonterra's cooperative ownership structure and the regulatory environment in which it operates, together with its 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."

Berry added given the Studholme factory produces milk products for export rather than domestic consumption, and would likely continue to do so whoever acquires it, the commission has not had to consider downstream markets in New Zealand for dairy products such as butter and cheese in this instance.

The commission also decided it was unlikely the operational agreement between the receivers and Fonterra, which provided for the continued operation of the Studholme plant for the 2012/2013 milking season, resulted in a substantial lessening of competition.

A public version of the written reasons for the decision will be available soon on the commission's website at www.comcom.govt.nz/clearances-register