DC Deal Done

The deal for Muller Wiseman to take over Dairy Crest’s liquid milk operation has been approved.  The Competitions and Markets Authority (CMA) has approved the sale of DC’s Dairies division which comprises the creameries at Severnside, Chadwell Heath, Foston and Hanworth, together with around 70 depots.

As a condition of the sale Muller will be required to ‘toll process’ up to 100m litres annually for five years at Severnside for Medina Dairies.  This is to ensure competition in the liquid milk market.

The original purchase price of £80m will stand, but DC are paying Muller a one-off reimbursement of £15m to reflect the cost of getting the deal through the CMA including meeting the conditions imposed.  The sale will take place no later than the 27^th December 2015. 

This leaves Muller and Arla as the two main players in the British liquid milk market.  The next few years will see a number of interesting questions answered.  Firstly, can Muller find efficiencies in the DC Dairies business by combining it with its own operation and make a profit? (it has been a millstone for DC for some years).  Will there be a rationalisation of facilities?  With a near duopoly might there be a rebalancing of power in the liquid milk supply chain between processors and retailers?  Will Medina be able to become a ‘third force’ in supplying major retailers, or will it remain a predominantly ‘middle ground’ processor?  What will happen to the ‘rump’ of Dairy Crest? – it shares have risen sharply following the approval of the deal, suggesting that it is seen as a takeover target.  Interesting times.