Arla Foods has agreed to sell the milk drinks business of Milk Link in order to satisfy competition authorities before merging with the UK dairy farmer co-operative.

The European Commission has approved a merger between Arla and Milk Link, creating the largest dairy group operating in the UK, the two companies announced today (28 September). However, Arla must sell Milk Link's milk drinks business, based at Crediton, due to competition concerns in the UK's long life milk sector.

Milk Link's Crediton dairy produces all of Milk Link's long life milk, long life cream, extended shelf life milk and flavoured dairy drinks and fresh bulk cream. Arla already has its own long life milk business.

Until Crediton is sold, it will be separated from the combined Arla, Milk Link business. "Arla has undertaken to preserve the economic viability, marketability and competitiveness of the business," said Arla today.

Following EU approval, Arla is set to complete its merger deal by 1 October. The deal extends Denmark-based Arla's reach in a key market. It already processes around 2bn litres of milk per year in the UK. This was set to rise by 50% after the Milk Link deal, although this estimate pre-dates news of the milk drinks unit sale.

In May, on announcing the deal, Arla Foods UK's CEO, Peter Lauritzen, said: "Arla has a strong record of investing in facilities and brands in the UK. 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."

Financial details of the deal have not been disclosed.