May 23, 2012


Milk Link and Arla plans for merger



Dairy co-operatives Milk Link and Arla group is merging for the development of a business which will process over 3 billion litres of milk a year.


Milk Link's proposed merger with Arla will create a platform for exports.

Neil Kennedy, CEO of Milk Link said: "The market is hugely competitive with pressure on farmers' returns and this merger is a great opportunity for really strong European business."


The new business will account for nearly a quarter (24%) of total UK production and bring much-needed stability to the UK milk market, he said.


Kennedy said the merger with Arla, the world's eighth largest dairy producer, would offer new export opportunities for First Milk dairy products, particularly in the US. "The merger puts the business on a strong growth trajectory, which, in the US, will result in it jockeying for position with Dairy Farmers of America and Dean Foods. It's a great opportunity to get our products to a global market."


The merged business will benefit from Milk Link's established market positions in fresh and long-life liquid and flavoured milks, cream, cheddar and speciality cheese, butter and dairy ingredients, according to a statement from the firm. It will have well-invested modern processing facilities located across the UK complemented by a national milk supply, it added.


Arla's UK dairy brands include Cravendale, Lurpak and Anchor.


Peter Lauritzen, chief executive of Arla Foods UK, said: "The enlarged business will be focused on delivering a sustainable future for our farmer owners.  It will mean that the largest and most progressive dairy business in the UK will be owned by Milk Link and Arla Foods amba farmers, as well as by Arla Foods Milk Partnership members, through their shareholding in Arla Foods UK plc, via their investment company, MPL."


Arla has a strong record of investing in facilities and brands in the UK, claimed Lauritzen. "Together, we will be able to offer British retail and foodservice customers with a full range of high quality dairy products from a single, secure, source, making us an even more attractive partner for British retailers. As such, the merger will be good for our farmers, our customers and their consumers and, ultimately, the British dairy industry."


The two businesses already operate a joint venture in Westbury Dairies, share facilities at Lockerbie and Milk Link supplies raw milk to Arla.


The proposed merger remains subject to approval by the Arla Foods group board of representatives, Milk Link members and regulatory authorities.


The proposed merger has been endorsed unanimously by the Milk Link Board with the full support of the Milk Link Member Council, said Kennedy.


Milk Link has 1,600 British dairy farmer members. The merger will result in Milk Link members achieving the same level of returns as Arla members "after a transitional period", said Milk Link.


The Bristol-based co-op reported group turnover up by GBP42 million (US$66.4 million) or 7.1%, for its reporting period of 2011/2012.


Comparable earnings before interest, tax, depreciation and amortisation climbed by 15.4%.


Comparable profit before tax was up to about GBP14.3 million (US$22.5 million).


Meanwhile, Arla also announced a proposed merger with Germany's eighth largest milk co-operative, Milch-Union Hocheifel.