Mergers under way in Germany and the UK
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- 22 May 2012
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Arla Foods is at a major turning point in the British and German markets. Two planned mergers will immediately increase Arla’s revenue by DKK 9 billion per year, thereby strengthening Arla Foods’ position as one of Europe’s leading dairy groups. As a result of the mergers, Arla will have, for the first time, co-operative owners in the UK, and in Germany the group of owners will be significantly expanded.
Arla Foods is today announcing plans for two major mergers – with Germany’s eighth largest dairy, the co-operative Milch-Union Hocheifel (MUH), which has owners in Germany, Belgium and Luxembourg, and with the UK’s fourth largest dairy, the co-operative Milk Link.
The owner representatives in Arla Foods and MUH and the members of Milk Link will make a decision on whether to merge on June 26th and the mergers will require clearance from the regulatory authorities. If the mergers are finalised and approved, Arla will be represented by owners in its four largest markets, the UK, Sweden, Denmark and Germany, and also in Belgium and Luxembourg.
Strong platform in Northern Europe
The growth goes hand in hand with Arla’s Strategy 2015, the key objective of which is to improve returns for its owners by, among other things, enhancing their positions in the core markets of the UK and Germany.
“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 for the industry – under well known brands as well as own label,” says Peder Tuborgh, CEO 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.”
Peder Tuborgh emphasises that, as with Arla Foods, both companies are owned by dairy farmers.
”In each of the three companies, the aim is to create value for our farmer owners in the form of a strong milk price. This will also be the case going forward, and our ability to deliver good results will be strengthened if these plans are realised.”
In line with Arla’s Strategy 2015
The mergers will bring Arla a significant step closer to a number of the main objectives in the Group’s Strategy 2015:
- Arla will be the UK’s largest dairy company and will rank third in Germany; these are both stipulated objectives for Arla by 2015.
- Another Arla objective is to achieve a revenue of DKK 75 billion by 2015. The two companies, which will become an integral part of Arla Foods if the mergers take place, have combined revenues of approximately DKK 9 billion. In 2011, Arla’s revenue amounted to DKK 55 billion. Together, the companies are expected to generate revenues of DKK 70 billion by 2013.
Over the course of the negotiating process, the Chairman of Arla Foods, Åke Hantoft, noted a strong relationship with the other two companies:
“All three dairy companies have been created by milk producers who, through investment, have built up companies that we can be proud of. Together, we’re now creating a company that will be well placed to take milk, our raw material, and create the highest possible value from it,” says Åke Hantoft.
“The strength and value lies in the fact that a co-operative dairy can rank among the world’s leading dairy companies, and this cannot be underestimated.”
Access to more markets and a broader product portfolio
The mergers are also a significant step for MUH and Milk Link who both want to ensure access to more markets, a broader product portfolio and a more stable return for their owners – by virtue of Arla Foods’ greater access to worldwide markets.
“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 provide a favourable and stable milk price. A merger will strengthen our position in Germany and mean that our products gain access to more markets,” says Rainer Sievers, CEO in MUH.
“Our proposed merger will bring together two successful, growth orientated farmer-owned dairy businesses with highly complementary positions in key markets, brands and customer bases. It reflects and reinforces Milk Link’s position as the UK’s leading dairy businesses and recognises and rewards the ongoing loyalty and commitment of our Members,” says Neil Kennedy, Milk Link Chief Executive.
The mergers will mean that Arla Foods will grow from 8,024 co-operative owners in Denmark, Sweden and Germany to 12,300 co-operative owners in Denmark, Sweden, Germany, Belgium, Luxembourg and the UK.
- Going forward, Arla will weigh in more than 12 billion kg milk against approximately 9 billion kg milk today
- The name will continue as Arla Foods amba.
- The co-operative owners of Milk Link and Milch-Union Hocheifel will continue to be co-operative owners of Milk Link and Milch-Union Hocheifel. These two companies will be corporate members of Arla Foods amba in line with the model used in the merger with the German Hansa-Milch in 2011.
- The three co-operatives’ combined revenue was almost DKK 65 billion in 2011.
- Arla’s revenue in Germany will increase from DKK 6 billion to just under DKK 11 billion.
- The UK is currently Arla’s largest market with a revenue of almost DKK 13 billion in 2011. It will increase by just over DKK 5 billion.
- The mergers are expected to take effect in 2012
- The new owners will be represented on Arla Foods amba’s Board of Directors and the Board of Representatives. Milk Link will have two seats on the Board of Directors and 10 seats on the Board of Representatives. MUH will have two seats on the Board of Directors, and nine on the Board of Representatives. This spring, Arla embarked on a general revision of the structure of the democratic system and this work continues.
- Arla’s UK milk suppliers in Arla Foods Milk Partnership (AFMP) will continue their current affiliation with Arla Foods UK plc. and will retain their joint ownership of Arla Foods UK plc, via their investment company, MPL.
- Both mergers require approval from the regulatory authorities.
Arla Foods is an international dairy company owned by 9,700 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands. Arla Foods is one of the leading players in the international dairy arena with well-known brands like Arla®, Lurpak®, Puck® and Castello®. Arla Foods is focused on providing good dairy nourishment from sustainable farming and operations and is also the world's largest manufacturer of organic dairy products.