British Dairy Giants In Advanced Merger Discussions

Fri, 05 Oct 2007
 
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Two of the largest farmer-owned dairy businesses in the UK are planning to join forces to create a new £1 billion dairy giant, it was announced yesterday.

First Milk, based in Paisley, Scotland and Bristol-based Milk Link said in a joint statement that they are in "advanced discussions" over a possible merger to provide the foundation to "create a farmer-owned dairy business with the scale, expertise and ambition to compete with global players".

However, the merger is not expected to make any attempts to compete with the three dairy processors which currently dominate the supply of fresh milk to major supermarkets - Robert Wiseman Dairies, Dairy Crest, and Arla – but instead, continue to supply both Dairy Crest and Wiseman.

First Milk and Milk Link are both co-operatives which are owned by thousands of farmers across the UK and were formed as result of the break-up of Milk Marque in 2000, as a result of a Competition Commission report that accused it of dictating prices to farmers.

The two companies handle a combined three billion litres of milk each year, which is supplied to dairy processors who then transport it to a host of supermarkets throughout the UK, including Sainsbury’s, Asda, Morrisons and Waitrose .

Once approval has been given by The Office of Fair Trading, the two farming co-operatives would have a workforce consisting of 2350 staff, handling milk from 4250 dairy farmer producers.

The dairy companies say there are many efficiencies to be gained from working together, including reduced transport costs from farm to factory .

Milk Link and First Milk are currently in a period of due diligence where they will be monitoring one another’s accounts before deciding whether to go ahead as planned, although the farmer owners of the two businesses must give final approval to the deal .

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