Freshways and Medina merger gets the thumbs up from the Competition Authority

Discussions between the two middle ground liquid processors started in February 2019 and 3 years later the CMA (Competition and Markets Authority) has issued its decision and fortunately for all involved in UK Dairy Plc they have decided not to refer the merger and have effectively given it a green light with no conditions.

The combined businesses will process circa 450 million litres milk a year from its sites in Acton (London), Buckleys (Huddersfield) and from a soon to be reopened Watsons (Southampton).  The Watsons facility was closed in October 2020 within days of Medina’s Sainsburys contract ending!

 

There are some interesting points contained in the CMA decision including:

 

1) Medina would have exited the (liquid) markets as a result of financial failure having had financial difficulties since 2018.  Since this date the CMA notes that “Medina’s performance has continued to deteriorate since 2018” and that “Medina will be unable to meet its financial obligations in the near future if the merger does not proceed”.  Don’t forget in 2020 Medina paid 50% of the Sainsburys suppliers milk cheque two weeks later than agreed due to cash flow issues.

 

2) The CMA comments that Medina exhausted all realistic alternative funding and restructuring options.

 

3) Without financial help from Freshways Medina would have exited the market sooner.

 

4) The CMA contacted 12 GB liquid processors none of whom showed any interest in purchasing the Medina business.

 

The one business which surprisingly escapes any mention by the CMA is Sainsburys.  Medina invested North of £3 million to facilitate the Sainsburys volume which ran for a 3-year period from 2017 to 2020.  Medina’s financial problems started in 2018 (1 year into the Sainsburys contract) when the business referred to problems with a major retail contract etc.  There is no disputing that the mighty retailer was a key contributor to the problems Medina faced.  Tomlinson’s faced almost identical challenges with Sainsburys however its business  collapsed closing  its doors in 2019.

Farmer suppliers are still angry at the fact Sainsburys encouraged a number of Muller farmers to transfer to Tomlinson’s in 2017 a move which resulted in 43 days milk deliveries for which zero payment was received in 2019.  Medinas 18 farmers faired better than those 67 with Tomlinson’s plus its 331 employees who lost their livelihoods.

 

 

Freshways and Medina have been working together for some time and the expectation is that the merger will take place in a matter of weeks rather than months and certainly by Summer of 2022 at the latest.

The outcome is the best for all involved including the Medina farmer suppliers who probably don’t fully appreciate how close they came to the collapse of their milk processor.

It’s almost inevitable Medinas farmer suppliers will be transferred to the new merged business in an orderly manner and should reap some benefits.