The Coles Group Ltd (ASX: COL) share price is falling on Friday despite some good news.
At the time of writing, the supermarket giant's shares are down 1% to $15.19.
What was the good news?
This morning, the Australian Competition and Consumer Commission (ACCC) revealed that it will not oppose Coles' proposed acquisition of two milk processing plants from dairy processor, Saputo.
As we covered here in July, the proposed acquisition was in doubt after the competition watchdog identified preliminary competition concerns.
It highlighted that a number of industry participants raised strong concerns as it will result in a major structural change as the first time a supermarket owns and operates its own milk processing facilities.
However, that hasn't been enough to prevent the deal from being approved by the ACCC today.
ACCC Deputy Chair Mick Keogh commented:
We acknowledge the strong concerns raised by some dairy industry participants about Coles' acquisition of milk processing facilities. We explored the industry's concerns very closely through discussions with farmers and their representative bodies, and conducted a detailed review of Saputo and Coles' internal documents and their incentives.
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.
What is Coles acquiring?
Coles is acquiring two automated milk processing facilities from Saputo Dairy Australia for approximately $105 million.
These facilities are located in Laverton North (VIC) and Erskine Park (NSW) and are close to Coles' distribution centres. They each have the capacity to process around 225 million litres a year and are predominantly used to process Coles Own Brand 2L and 3L milk.
In response to the news this morning, Coles CEO Leah Weckert said:
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 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.
The transaction is expected to complete in the second half of FY 2024.
The Coles share price is down almost 10% over the last 12 months.
