National Foods has offered the ACCC a proposed undertaking to address any competition concerns that the ACCC may have with their proposed takeover of Dairy Farmers.

National Foods, a subsidiary of the Japanese-owned Kirin Holdings, announced in April that they would combine with Warrnambool Cheese and Butter (WCB) to make a joint bid for the Australian dairy co-operative. The ACCC commenced a public, informal review into their proposal on April 17 to determine the competition implications of a takeover.

National Foods has now sought to allay any competition fears the ACCC may have by proposing to strategies to limit the competition impact of any takeover.

The strategies outlined would involve the divestiture of 12 National Foods depots in the NSW and ACT and 13 Dairy Farmers depots in South Australia, and a transfer of Lidcombe processing plant, which is currently operated by Dairy Farmers.

National Foods has also advised that they will be willing to grant the Approved Purchaser a 2 year licence to manufacture, distribute and sell the Daisy Fresh and Pura range of fresh white milk in NSW and the ACT. A perpetual licence for the Oak and Just Natural flavoured milk brands, owned by Dairy Farmers, will also be granted to the purchaser in NSW, SA and the ACT, while the majority of Dairy Farmers’ fresh white milk brands in South Australia will also be under a perpetual license arrangement.

The Approved Purchaser would be required to be independent of National Foods, have the capabilities to effectively run the divested business(es) and be subject to analysis from the ACCC regarding competition concerns.

The ACCC reported in a letter that they have not formed a view as to any potential competition issues regarding the proposed acquisition and the undertaking would not guarantee approval. “The decision to consult on the proposed undertaking does not necessarily mean the ACCC will require divestitures or, in the event that any competition concerns are identified, that any aspect of the proposed undertaking would be acceptable to the ACCC,” the letter said.

If the National Foods-led joint venture succeeds with a bid for Dairy Farmers, National Foods has indicated that they will purchase all of the shares in Dairy Farmers and the co-operative would then be turned into a company trading under the Corporations Act.

The bidding at the moment is between the National Foods-WCB joint venture and the joint venture of Italian-owned dairy giant Parmalat SpA and Australian co-op Murray-Goulburn. Speculation remains that Canadian company Saputo may enter the bidding process but this remains unfounded.

There have also been reports that Fonterra may link with National Foods and WCB following Fonterra’s withdrawal from the bidding process. A Kirin spokesman confirmed last week that there had been talks with Fonterra and Dairy Farmers waved confidentiality agreements to allow talks between the companies. No deal has been announced as of yet though.

Dairy Farmers Chief Executive Rob Gordon suggested that the talks between Fonterra and National Foods were indicative of the strength of interest in the Australian co-op. “As we move through this (sale) process, major local and international dairy players are taking positions and joining forces to increase their capacity to secure Dairy Farmers’ assets and brands,” he advised in a statement.

Dairy Farmers, which is currently owned by a group of about 2000 farmers, put themselves up for sale in March this year. Companies have until the end of the month to announce their intention to bid for the company, which is valued at around A$1b.

The ACCC would welcome submissions from interested parties regarding the National Foods proposal up until July 16, with an announcement of findings to be made on July 24. Findings into the Parmalat and Murray-Goulburn proposal will be made available by July 17.

For more information regarding the National Foods undertaking and how submissions can be made to the ACCC please go to: www.accc.gov.au/content/index.phtml/itemId/824258/fromItemId/750991.

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