Cooperative dairy companies Campina, of the Netherlands, and Arla Foods, of Denmark, have announced that they have called off their merger talks, abandoning proposals that would have created Europe's largest farmer-owned dairy company.

"Following the final negotiations, the boards of directors of Arla Foods and Campina have concluded that it has not been possible to present at this time a joint merger proposal to the two companies' boards of representatives. Consequently, the two boards have agreed to abandon further merger talks," Arla Foods said in a statement, adding that it could not elaborate on the reasons for the decision.

"We have enormous respect for Campina and regret that we could not reach a satisfactory result this time around," said Arla Foods chairman Knud Erik Jensen. "We will part as friends and it could well be that we continue our dialogue at some future stage."

Arla Foods also announced the resignation of its managing director, Åke Modig, who said: "The board and I have agreed that I leave the company now that the outcome of the merger process has been decided. However, I will remain managing director until the board has appointed my successor."

Campina's CEO, Justinus Sanders, said his company regretted Modig's departure: "We respect Mr. Modig's constructive contributions to our merger talks. One of the initiators of the envisaged merger is now leaving. Also because of this, there is no basis for further discussions at the moment."

Sanders added that although the company regretted the fact that the merger had to be called off, it remains convinced that Campina has "enough opportunities and strength to continue its successful course of international growth, innovation and efficiency".

Arla Foods, meanwhile, said it has a strategy for going forwards that includes increased focus on added value speciality cheese for export markets, continued growth through the Lurpak brand, increased exports to the UK market, and further investments and acquisitions. Under its so-called "stand-alone" strategy, Arla Foods will focus on the Nordic countries, the UK, exports and ingredients, as well as on cutting costs and increasing efficiency.

Campina and Arla Foods announced plans to negotiate a merger on 8 December 2004.