February 6, 2008

UK's US$1.97-billion dairy merger called off

The creation of a GBP1-billion (US$1.97 billion) dairy giant, through merging Glasgow's First Milk and Bristol's Milk Link, was called off after cooperatives abandoned plans.

The two companies previously planned to join forces to create one of the UK's biggest milk suppliers, generating nearly 3 billion litres a year, or a quarter of the country's supply.

But the firms said that the deal was called off after they were unable to agree a valuation of the two businesses and how the new entity would be structured.

The companies said there were no terms agreed despite extensive discussions.

First Milk is owned by 2,600 farmers across the UK, while Milk Link comprises 1,650 UK farmers mainly in the South West of England.

The two cooperatives turn over around GBP500 million (US$923 million) a year.

The National Farmers' Union (NFU) said the move was disappointing. Gwyn Jones, NFU dairy board chairman, said the British dairy industry might be left further behind its EU competitors.

Talks about the tie-up started in October last year, with the cooperatives hoping to take on overseas rivals such as Danish group Arla and New Zealand's Fonterra through the tie-up.

The deal had been approved by the Office of Fair Trading (OFT) in December.