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Coles Group Ltd's (ASX:COL) recent acquisition worth AU$105 million has received approval from the Australian Competition and Consumer Commission (ACCC). However, the company's share price reflects a decline despite this positive development. Coles' shares closed 1.04% down at AU$15.17 apiece on 1 December 2023.
The ACCC announced its decision not to resist Coles' proposed purchase of two milk processing plants from Saputo, despite earlier concerns raised by industry participants. Initial doubts arose due to the structural shift expected as a supermarket would own and manage its milk processing facilities.
These proposed acquisitions of facilities are closely positioned to Coles' distribution centers, play a crucial role in processing Coles' Own Brand 2L and 3L milk.
ACCC's Evaluation and Rationale
ACCC Deputy Chair Mick Keogh acknowledged the concerns raised by dairy industry participants regarding Coles' acquisition. However, after extensive discussions and a thorough review of internal documents from Saputo and Coles, the ACCC concluded that the acquisition is unlikely to substantially lessen competition.
These facilities, closely positioned to Coles' distribution centers, play a crucial role in processing Coles' Own Brand 2L and 3L milk.
Coles' CEO Response and Future Prospects
Coles' CEO, Leah Weckert, expressed satisfaction with the ACCC's decision, emphasizing the acquisition's potential to enhance milk supply security and supply chain resilience. The transaction is anticipated to finalize in the second half of FY 2024, benefitting Coles' relationships with dairy farmers.
Conclusion
Despite the recent ACCC approval and positive implications for Coles' milk supply chain, the company's share price experiences a downward trend, reflecting nearly 10% decrease over the last 12 months.
