Arla Foods to merge with Milch-Union Hocheifel, Milk Link

Swedish-Danish dairy co-operative Arla Foods has announced plans to merge with German co-operative Milch-Union Hocheifel (MUH) and British co-operative Milk Link, to strengthen its position in Europe.

The mergers are part of Arla’s Strategy 2015, under which it seeks to improve returns for dairy farmer owners, increase revenues, and enhance its position in the UK and Germany.

Arla Foods CEO Peder Tuborgh said the mergers will strengthen the co-operative’s position as one of Europe’s leading dairy companies, and will deliver significant volumes and a strong product mix under own label as well as popular brands.

"Both Milk Link and Milch-Union Hocheifel are strong, well run dairy groups, which, with their product portfolios and production systems, will strengthen our business in both countries," Tuborgh added.

Arla reported revenues of DKK55bn ($9.44bn) in 2011, and it expects the mergers to boost its annual revenue by DKK9bn ($1.54bn), and increase its annual production from 9 billion kg of milk to more than 12 billion kg.

Arla, which has 8,024 co-operative owners in Denmark, Sweden and Germany, said that the deal will add owners from the UK for the first time and also significantly expand its group of owners in Germany, taking its total ownership base to 12,300.

The combined revenue of the three co-operatives was about DKK65bn ($11.16bn) in 2011, and the mergers are expected to increase the combined revenue to nearly DKK70bn ($12.02bn) by 2013.

The owner representatives in MUH and Arla Foods and the members of Milk Link will take a decision on the merger proposal on 26 June 2012, following which the proposal will be sent for regulatory approvals from respective countries. Arla expects the mergers to take effect in 2012.

MUH is Germany’s eighth-largest dairy and it produces UHT milk, condensed milk, UHT milk shake products, UHT cream, butter, UHT sour cream and dessert sauces.

Milk Link, the fourth largest dairy in the UK, is a leading producer of cheddar cheese and exports its products to nearly 20 countries across the globe.

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Image: Arla Foods’ mergers with MUH and Milk Link will help the co-operative to cement its position in two major markets, the UK and Germany. Photo: Arla Foods amba.