Arla Foods to merge with German, U.K. cooperatives

by Jeff Gelski
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VIBY, DENMARK – Planned mergers with a cooperative in Germany and a cooperative in the United Kingdom would increase annual revenue by DKK9 billion ($1.5 billion) for Arla Foods, the company said May 22. Milch-Union Hocheifel (MUH), Germany’s eighth-largest dairy, has owners in Germany, Belgium and Luxembourg while Milk Link is the U.K.’s fourth-largest dairy.

The owner representatives of the three companies will decide whether to merge on June 26. The mergers are expected to take effect this year. They will require clearance from regulatory authorities.

The mergers fit into Arla’s “Strategy 2015” to enhance the company’s position in the markets of the United Kingdom and Germany. Arla Foods plans to have annual revenue of DKK75 billion ($12.9 billion) by 2015. The company had 2011 revenue of DKK55 billion. If the mergers are achieved, the company is expected to generate revenue of DKK70 billion by 2013.

The mergers would grow Arla Foods to 12,300 cooperative owners in Denmark, Sweden, Germany, Belgium, Luxembourg and the United Kingdom from its current 8,024 cooperative owners in Denmark, Sweden and Germany. Arla annually would weigh in at about 12-billion kilograms (26.4 billion lbs) of milk against 9-billion kilograms today.

“If the owners agree on these mergers, it will strengthen Arla Foods’ position as one of Europe’s leading dairy companies: a broad ownership, which delivers significant volumes and a very strong product mix, both for consumers and the industry, under well-known brands as well as own label,” said Peder Turborgh, chief executive officer of Viby-based Arla Foods. “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.”

The company’s name will continue as Arla Foods amba. The owners of Milk Link and Milch-Union Hochefiel will continue to be owners of their respective cooperatives. Milk Link will have two seats on the board of directors and 10 seats on the board of representatives. Milch-Union Hochefiel will have two seats on the board of directors and nine seats on the board of representatives.

“We’re already a European dairy company, but through a merger with Arla, we’re pursuing our strategy of becoming an international company that is able to produce a favorable and stable milk price,” said Rainer Sievers, c.e.o. of Milch-Union Hocheifel. “A merger will strengthen our position in Germany and mean that our products gain access to more markets.”

Neil Kennedy, c.e.o. of Milk Link, said, “Our proposed merger will bring together two successful, growth-oriented farmer-owned dairy businesses with highly complementary positions in key markets, brands and customer bases.”

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