December 18, 2008
The European Commission has approved the merger of dairy cooperatives Friesland Foods and Campina, though the two firms are expected to release a final decision on the merger soon.
Even if the merger goes ahead, some parts of the business would have to be divested, according to the companies.
To meet the objections of the European Commission, the activities of Friesland Foods Fresh (fresh dairy) in Nijkerk, the cheese production plant of Campina Holland Cheese in Bleskensgraaf and the Yogho Yogho and Choco Choco brands (long-life dairy drinks) in the Netherlands and Belgium will have to be divested. These business units jointly account for revenue of about 367 million euros, representing some 4 percent of the new company's total revenue of EUR9.1 billion.
To guarantee the availability of Dutch raw milk for third parties in the Netherlands, FrieslandCampina is required to make available annually a maximum of 1.2 billion kg of Dutch raw milk to new or existing producers of fresh dairy products or naturally matured cheese in the Netherlands, provided they are interested in buying this milk.
An independent foundation will be set up for this purpose and will be operational from mid-2009. In order to reduce FrieslandCampina's share in the Dutch raw milk market and guarantee the availability of milk for third parties, member dairy farmers who opt to cancel their membership of FrieslandCampina and deliver their milk elsewhere will receive an amount of EUR5 per 100 kg of milk. This applies, however, up to a maximum of 1.2 billion kg of milk. Cancellation of the membership is voluntary, so each member decides independently and there will be no compulsory cancellation. The quantity of milk for which this incentive will be paid will be deducted from the quantity of milk made available for sale annually via the foundation. The conditions imposed by the European Commission, incidentally, form no barrier whatsoever to the operational growth in the milk volume of the member dairy farmers of FrieslandCampina.
If the two cooperatives agree on the merger, it will go ahead on December 30, 2008, according to Cees't Hart, the proposed CEO of the new company.
In December 2007, both dairy cooperatives announced their intention to merge in order to allow them to anticipate better and to respond more dynamically to the rapidly changing market conditions, extensive deregulation (EU/WTO) and increased regional and global competition.
Royal Friesland Foods is a multinational that produces and markets natural, dairy products, fruit drinks and ingredients. Friesland Foods is represented in more than 100 countries, and the business is based on a cooperative model.
Campina has operations in several countries including the US, Japan, the Netherlands, Germany and Belgium. Campina is also a leading global supplier of ingredients to the food and pharmaceutical industry.
US$1 = EUR0.6928 (Dec 18)