UPDATE 3-Aussie regulator will not oppose Coles' buyout of Saputo milk processing plants

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Coles acquired two milk processing plants in April

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ACCC delayed decision on the deal in September

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Deal unlikely to substantially lessen competition - ACCC

(Updates with Saputo Dairy's comment in paragraph 8)

By Rishav Chatterjee

Dec 1 (Reuters) - Australia's competition watchdog said on Friday it will not oppose the proposed buyout of two milk processing plants by retailer Coles Group from local dairy processor Saputo as it would unlikely lessen competition in the dairy market.

Coles, the country's No. 2 grocer, had in April acquired two automated milk processing facilities from Saputo Dairy Australia for A$105 million ($69.34 million) in a move to expand its milk supply.

The Australian Competition & Consumer Commission (ACCC) said the acquisition is unlikely to result in a substantial reduction in competition after taking into consideration various concerns from different stakeholders.

The ACCC, after having earlier raised concerns, in September delayed its decision on the same as local dairy farmers flagged worries that it would further reduce competition and lower milk prices.

"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," said ACCC deputy chair Mick Keogh.

The two facilities that Coles acquired – the Erskine Park factory in New South Wales and the Laverton plant in Victoria – process and bottle milk for supermarkets.

The ACCC added that companies including Lactalis and Bega Cheese in dairy markets would continue to be competitors for raw milk in central New South Wales irrespective of the deal.

Saputo Dairy Australia said in an email to Reuters that it will continue to process fresh milk products at the two facilities, and maintain agreements with farmers and milk suppliers.

The watchdog said despite finding that Coles may have an incentive to consolidate some of its milk volumes in the eastern states, the deal will hardly lead to "substantial lessening of competition."

Coles, the supermarket giant, said it expects the deal to complete in the second half of fiscal 2024 and will continue to work to clear other outstanding conditions.

($1 = 1.5142 Australian dollars) (Reporting by Rishav Chatterjee in Bengaluru; Additional Reporting by Shivangi Lahiri; Editing by Maju Samuel and Sherry Jacob-Phillips)