Two of the leading dairy producers on the island of Ireland are to merge parts of their business in what has been hailed as “a significant and strategic development” in the sector.
Banbridge based Fane Valley is to merge some parts of its business with Lakeland Dairies based at Bailieboro, County Cavan.
Fane Valley employs more than 2,200 people while Lakeland has almost 700.
Both are dairy processing and agribusiness co-operatives and are to create two major new joint venture businesses they predict will generate combined revenues of more than £600 milli0n, with enhanced economies of scale and overall competitiveness for their farmer members, milk producers and customers.
The first venture will see the merger and pooling of both groups’ manufacturing, sales and stores activities into a major agribusiness company to be managed by Fane Valley and worth around £125m per annum.
Lakeland Dairies will be a partner and shareholder in the business and will also be represented on the board of the new company.
The second, more ambitious, venture will see the merger of dairy processing activities and operations, to be managed by Lakeland Dairies and worth an estimated £480m a year.
In Northern Ireland, Fane Valley and Lakeland Dairies currently procure 250 million litres and 330 million litres of milk respectively each year for processing into a wide range of value added dairy products and food ingredients, all of which are exported worldwide.
The purpose of the Dairy Joint Venture is to create a business of greater scale and efficiency with the capability to grow and to compete even more intensively on a global basis.
Combined with the total existing Lakeland Dairies milk pool, the Dairy Joint Venture will process more than 1 billion litres of milk annually.
This will enhance the overall capacity of both co-operatives to maximise returns from the markets in the interests of their milk producers.
Fane Valley milk suppliers will receive the same benefits and provisions as Lakeland Dairies milk suppliers and Fane Valley will have direct representation on the Board of Lakeland Dairies.
Both co-operative societies will otherwise continue to operate on an independent basis and each will support the other in the operation of the Joint Ventures.
“This far sighted agreement represents the strong commitment of Fane Valley and Lakeland Dairies to support our members, milk producers and customers through the development of an even more competitive market position on a joint venture basis,” said Fane Valley chief executive Trevor Lockhart.
“The combined strength and backing of both co-operatives will ensure success for our agribusiness and dairy operations and will underpin the future success of our business.”
Lakeland chief executive Michael Hanley said the deal would create further value and benefits for the producers and customers of both co-operatives.
“Through this combination, we are adopting an innovative and strategic approach to maximising our efficiencies and overall strength in addressing the growing worldwide market demand for dairy products and food ingredients.”