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No issues for Danone Chile takeover

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By Jim Cornall+

16-Feb-2017

The deal to sell Danone Chile to Watt's has been approved by Chile's FNE.
The deal to sell Danone Chile to Watt's has been approved by Chile's FNE.

Chile’s Fiscalia Nacional Economica (FNE), the country’s competition authority, has said that a takeover of Danone Chile by Watt’s can go ahead.

DairyReporter reported on the initial deal , thought to be for around $24m.

Watt's and Danone also agreed on the main elements of a license agreement for the use of Activia, Danone and Danone Light brands in Chile. Both companies will continue to develop Danone brands.

The FNE started its investigation in April 2016 as to whether Watt’s S.A. could buy Danone Chile S.A., given that “the operation would end the independence of two economic agents competing in the markets” for supply of fluid milk; processing and marketing of dairy products (liquid milk, cream, yogurt and cultured milk); and processing and marketing of refrigerated jellies.

Also of initial concern was that Danone Chile’s fluid milk receiving plant is located in Chillón (VIII region) and Watt's in Osorno (X region).

Producers of fluid milk that Danone Chile buys are located almost exclusively in Regions VIII and IX, while about 90% of Watt’s producers are in regions XIV and X.

The FNE determined it “does not observe that, as a result of the Operation, risks are generated for competition in the fluid milk supply market.”

No issues with UHT or yogurt

In terms of long-life liquid milk or UHT, the FNE estimated the different varieties of liquid milk could be considered part of the same relevant market, due to the existence of substitution of supply among differentiated products.

It said a competition analysis was performed for different scenarios of relevant market definitions regarding UHT milk, and there were no risks for competition.

With regard to yogurt, the FNE found there are also no risks relevant to competition.

It said, although Danone Chile has been present in the lactose-free yogurt sector since 2014, its products have been positioned for consumers other than Watt’s’.

Danone’s lactose-free Activia yogurt is focused on the functional segment, while the lactose-free Calan yogurt is targeted at children; Watt's’ Loncoleche lactose-free yogurt has attributes not focused on children or functional, but rather on adults in general, the FNE said.

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