Abattoir and meat giant Danish Crown aims to merge with smaller competitor Steff-Houlberg, in a bid to counter the fast consolidation in the food retail sector.

The two operators stand to gain a 95% market share in all Danish slaughtering through the merger, raising a question mark over approval by fair trade authorities. Given clearance however, they said that the new company would employ 22,500 people.

Steff-Houlberg initiated the merger talks, and chairman Bent Maribo said slack earnings development was part of the reason it sought closer cooperation with Danish Crown: “When Danish Crown merged with Vestjyske Slagterier in 1998, Steff-Houlberg set a goal to match the earnings of Danish Crown. But we have failed to do so and will do so this year too.”

A merger is crucial for Steff-Houlberg as the Nordic food retail and processing industries are consolidating in order to gain critical mass.

The question is what interest Danish Crown could have in merging with Steff-Houlberg, a move that will make the firm less suitable for any more appealing mergers with Nordic operators. Danish Crown is seven times larger than Steff-Houlberg, with a turnover of US$4.43bn.

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In Sweden, there has recently been speculation that Danish Crown and Swedish Meats were mulling closer cooperation, and possibly a merger in a few years. Swedish Meats is Sweden’s largest meat group with a 2000 turnover of US$0.77bn.

By Jerry Simonsson, just-food.com correspondent