* Regulator raised antitrust concerns over deal
* Murray Goulburn wants a lifeline after China expansionfailure (Updates shares, adds pictures)
SYDNEY, March 5 (Reuters) - Canada's Saputo Inc SAP.TO said on Monday it is discussing plans to sell a milk plant inVictoria state to address concerns from Australia's competitionwatchdog about its buyout of Murray Goulburn Co-operative MGC.AX .
Canada's biggest cheesemaker last year agreed to pay up toA$490 million ($380 million) for debt-ridden Murray Goulburn,but the Australian Competition and Consumer Commission (ACCC)said the deal may leave some Victorian farmers little choicewhen selling their milk. has initiated discussions with the ACCC in respectof a divestment plan for the Koroit dairy plant in order toaddress the ACCC concerns and to obtain the ACCC clearance,"Saputo said in an emailed statement.
Murray Goulburn said in a statement it would "work closelywith Saputo and the ACCC to seek approval of the asset sale".
Victoria's Weekly Times newspaper last week reported rivalBega Cheese Ltd BGA.AX , once a suitor for Murray Goulburn, wasamong firms interested in the Koroit plant, citing remarks fromits Chairman Barry Irvin.
Bega did not immediately respond to a request for comment.
Murray Goulburn has been seeking a financial lifeline since2016 when plans to sell high-margin products like infant formulain China led it to overpay for source milk, while sales fell farbelow expectations.
The deal would leave Saputo processing nearly half ofAustralia's milk output under the current deal, according toindustry body Dairy Australia.
Murray Goulburn shares were up 1 percent at 84 Australiancents in morning trading, well below their A$2.10 issue price.The broader market was down 0.3 percent.
($1 = 1.2897 Australian dollars)