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Fonterra cleared to buy NZ Dairies

Friday 7th September 2012

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Fonterra Cooperative Group, the world's biggest dairy exporter, has been given antitrust 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 said in a statement.

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 said it was satisfied that Fonterra cooperative 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.

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