UK dairy co-operative First Milk still believes consolidation is needed in the sector despite its plan to merge with local rival Milk Link failing to get off the ground.
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The company told just-food today (6 February) that it remains keen to grow its business in order to compete with global rivals like Arla Foods, Campina and Friesland Foods.
“This was just one deal that didn’t work,” a First Milk spokesman said. “We still believe that consolidation is required in the dairy industry and that we need to get our company bigger and stronger to compete with companies overseas.”
The spokesman refused to be drawn on the options open to First Milk but said its ambitions were not just restricted to the UK.
First Milk and Milk Link opened merger talks in October and had then insisted that the enlarged GBP1bn (US$1.9bn) company would “create an organisation that will deliver enhanced and sustainable returns for its members”.
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By GlobalDataThe talks had foundered on a “number of important issues”, the two co-operatives said, including agreement on how much the companies are worth.
The First Milk spokesman said an independent review had estimated that the company was worth more than Milk Link due, in part, to First Milk’s 15% stake in Robert Wiseman Dairies.
“A takeover is much easier than a merger as you have to find a compromise to work for both parties,” the First Milk spokesman said. “We have other strategic options running in parallel.”
Officials at Milk Link could not be reached for comment as just-food went to press.
Nevertheless, the UK farmers’ union said it was “bitterly disappointed” with the abandonment of the merger.
“We cannot help but feel that the British dairy industry will be left further behind its EU competitors,” said National Farmers Union dairy board chairman Gwyn Jones.
“We operate in an increasingly international market and to compete effectively businesses must rationalise or they will not survive long-term. A real opportunity to do this has been missed.”
