UK dairy processor First Milk has said that a formal proposal to merge with fellow farmer-owned co-operative Milk Link is likely to be put before the companies’ members next month.
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First Milk and Milk Link announced yesterday that they were in “advanced discussions” over a possible merger, a deal that would create a GBP1bn (US$2bn) dairy giant.
Due diligence has already started and First Milk told just-food today (5 October) that the farmers behind both companies are likely to vote on a merger next month. “We should have a recommendation to put to members next month,” a spokesman for First Milk said.
Both companies have informed the Office of Fair Trading, the UK’s competition watchdog, of their plans.
The OFT will “automatically” study any merger proposals, a spokesperson for the watchdog said. She refused to be drawn on how the OFT would view a merger, saying that it is “very, very early days”.
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By GlobalDataFirst Milk said it was not expecting any regulatory problems. “We are operating in a world market with global competitors,” the spokesman said.
The two co-operatives, owned by a total of 4,250 farmers in the UK, want to join forces to increase their pricing power, a factor that is growing in importance as dairy commodity prices soar around the world.
For First Milk, high dairy prices are here to stay. “Our view is that these market conditions are here to stay. Prices may drop off slightly but the dynamics underpinning them are here to stay,” the spokesman said.
