Coles share price falls despite ACCC acquisition approval

Coles' $105 million dairy acquisition has been approved by the ACCC.

| More on:
A woman sits with a glass of milk in front of her as she puts a finger to the side of her face as though in thought while her eyes look to the side as though she is contemplating something.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

a woman drawing image on wall of big fish about to eat a small fish
Mergers & Acquisitions

2 ASX shares rocketing up to 20% on takeover news

Takeover offers have been put on the table for these companies.

Read more »

Miner looking at a tablet.
Mergers & Acquisitions

Alumina shares leap 8% on Alcoa takeover bid

ASX 200 investors are sending the Alumina share price soaring following confirmation of Alcoa’s takeover intentions.

Read more »

A man stands in a building site featuring brick walls with building equipment in the background.
Mergers & Acquisitions

CSR share price jumps again as blockbuster bid confirmed

Investors are excited about a potential takeover.

Read more »

A fit man sits and prepares to dive into a hole made in frozen ice.
Mergers & Acquisitions

Guess which ASX 200 stock is frozen on a $976 million acquisition

This company is about to throw down more than one-tenth of its value to double its production.

Read more »

A surprised man sits at his desk in his study staring at his computer screen with his hands up.
Bank Shares

ANZ shares tumble despite Suncorp Bank takeover approval

The Australian Competition Tribunal has finally given the deal the thumbs up.

Read more »

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

APM shares rocket 73% after rejecting $1.5b takeover

$1.5 billion wasn't enough for this company's board.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Mergers & Acquisitions

Why are Boral shares outperforming the ASX 200 today?

This building materials company has received a takeover offer.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Technology Shares

Altium shares rocket on $9.1b takeover deal

This tech stock looks set to leave the ASX boards after accepting a takeover offer.

Read more »