Australian Competition and Consumer Commission (ACCC) has approved the proposal of the Chinese company Mengniu Dairy to acquire Lion Dairy & Drinks.

The competition authority notes that it has approved the takeover proposal after examining the potential impact the deal may have on competition in the country.

ACCC deputy chair Mick Keogh said: “While Burra and Lion D&D compete for the acquisition of raw milk, they are not close competitors and our investigations concluded that dairy farmers are unlikely to switch between the two.

“The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion D&D combined acquiring less than 25% of raw milk in Gippsland. Two other large raw milk buyers remain in the Gippsland region, Saputo and Fonterra, as well as some smaller processors.”

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The deal was announced last November after Mengniu Dairy signed an agreement with Kirin Holdings and Lion to acquire the Lion Dairy & Drinks business in Australia for A$600m ($407m).

Under the agreement, Mengniu Dairy will acquire white milk, milk-based beverages, juice, yoghurt and water ice brands and assets.

It will also buy Lion Dairy & Drinks’ International business, as well as Dairy & Drinks share of the joint ventures Vitasoy Australia Products and Capitol Chilled Foods Australia and Dairy & Drinks licensing agreement for the Yoplait brand.

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In its investigation, ACCC found that the proposed acquisition will have an impact on competition for the purchase of raw milk from dairy farmers in the Gippsland region.

Gippsland is the only area that has processing facilities ultimately owned by both Lion D&D and Mengniu.

ACCC added that it identified a significant spare processing capacity at other raw milk processors in the Gippsland region, giving farmers alternative potential buyers for their milk.