The management board of dairy giant Arla Foods has approved a merger with struggling Swedish dairy cooperative Milko.
The Arla board met on Tuesday (28 June) to reach a decision on the merger agreement, which was announced earlier this month. Milko’s management will vote on the merger at a meeting on 14 July.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The potential deal was announced earlier this month. Milko said it had approached Arla with a view to merging as a result of “unsatisfactory profit development in 2011 and in order to avoid a future liquidity issue”.
“At Milko, our finances have been imbalanced for some time and in recent years we have been forced to take several radical cost-cutting initiatives,” said Milko spokesman Lars Reyier earlier this month. “However, sales development has continued to be very weak in 2011 and the board has therefore decided to dramatically reduce the milk settlement price.”
Under the merger, Milko members will become cooperative members and owners of Arla Foods on an equal footing with existing Arla members. The Milko members will receive the Arla milk settlement price from ‘day one’ after the merger has been completed and approved by Konkurrensverket (the Swedish Competition Authority).
The Arla spokesperson said the company needed more milk to continue to grow in Sweden.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe spokesperson added: “We have the strength and structure to develop both the company, Milko and receive milk from the dairy farmers that in a merger wants to go to Arla. A merger is in line with our ambition to be a food inspirer for the whole of Sweden.”
A spokesperson for Milko said the company is confident that the merger will be approved by its board on 14 July given the positive feedback to date. A 50% majority will be required for the merger process to continue.
Following that, a further meeting will be held on 4 and 5 October comprising of an Arla board of representatives. The merger cannot then complete until the Swedish Competition Authority gives its approval.
