Coles’ proposed acquisition of two milk processing plants from dairy processor Saputo has cleared a major hurdle, with the Australian Competition & Consumer Commission (ACCC) announcing it will not oppose the deal.

Following the acquisition of the two plants in Victoria and NSW, Saputo will have its raw milk processed by Coles at these facilities. Coles will be the first Australian supermarket to own and operate milk-processing facilities.

“After careful consideration, we concluded that, compared with the current state of competition where the majority of the capacity at these facilities is already contracted to Coles, the acquisition is unlikely to result in a substantial lessening of competition in breach of section 50 of the Competition and Consumer Act,” said ACCC deputy chair Mick Keogh.

Saputo’s financial data indicates it has a commercial incentive to continue selling its Devondale milk in NSW. The company also entered into a five-year processing agreement with Coles at the NSW plant.

“We considered that the proposed acquisition would be unlikely to change Saputo’s incentives to continue acquiring raw milk from farmers in NSW for at least the next five years,” Keogh elaborated.

Other dairy companies, namely Lactalis and Bega, will continue to be competitors for raw milk in central NSW, he added.

In addition, the ACCC found that Coles’ commercial incentives to consolidate its milk supply would exist with or without the transaction due to the significant excess capacity at the two plants.

“We are pleased with the ACCC’s findings in relation to this transaction. Once completed, the acquisition of these state-of-the-art facilities will enable Coles to improve the security of our milk supply and supply chain resilience and allow us to continue to build on the strong relationships we have developed with our dairy farmers,” said Leah Weckert, Coles CEO.

The transaction is expected to be completed in the second half of FY24 after all outstanding conditions are met.