The deal, announced in November, would see Müller UK & Ireland buy the struggling dairy operations of Cathedral City maker Dairy Crest, giving it control of about a quarter of milk produced in the UK.
But Dairy Crest said that, “following constructive talks with the European Commission”, the deal had now been referred back to the UK for review by the Competition and Markets Authority (CMA).
It added that the transaction, which has already been approved by its shareholders and includes flavoured milk brand Frijj, remained “on track”.
The deal will leave the UK milk market in the hands of three major firms: global dairy co-operative Arla, Glasgow-based First Milk – also owned by farmers – and Müller, which bought Glasgow-based Robert Wiseman Dairies in a £279.5m deal in 2012.
Dairy Crest chief executive Mark Allen said: “This will be a positive development for both Dairy Crest and the UK dairy industry as a whole, delivering economies of scale that will help create a more sustainable UK dairy sector that is better placed to compete on the global stage.
“It has always been our preference for the transaction to be reviewed in the UK, so we welcome this referral back to the CMA as a positive step. We will work with Müller and the CMA to progress the merger review as quickly as possible.”
The move will allow Dairy Crest to focus on its cheese and spread operations, which include brands such as Cathedral City, Clover and Country Life.
Dairy Crest’s dairy operations process and deliver around 1.3 billion litres of milk a year.
But half-year results released in November showed the division slipping to a loss of £4.4m in the six months to the end of September amid falling market prices, which had “now led to difficult milk price cuts for British dairy farmers”.
Analysts at Shore Capital said the referral to the CMA had been expected, adding: “There remains some water to flow under the bridge for this important proposed deal to be cleared but shareholders in Dairy Crest will no doubt welcome this procedural development and with cautious optimism hope for a successful conclusion from the CMA.
“We see this proposed deal as an important and good one, not just for Dairy Crest but also the whole dairy farming and processing industries in Great Britain.
“If it did not go through we would be concerned about the ongoing stability of the liquid milk industry and the farmers that supply it.”
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