Dairy Crest scrambles after regional dairy co-op
confirmed that it is in "advanced discussions" to acquire
one of the UK's largest regional dairy co-operatives, Tom
Armitage reports.
The company said that it expected to complete a deal to buy all of Midlands Co-operative Society's (MCS) dairy operations by the close of the month - although it declined to give any indication of the cost implications.
MCS said that it had "reluctantly" decided to sell the business, which currently employs around 800 staff across England and Scotland, adding that an "extremely competitive market" had compromised its ability to compete with bigger rivals.
It is understood that the deal would enable Dairy Crest to carry on its milk processing activities, following the termination last week of a £60 million contract to supply number one UK retailer Tesco with a reported 160 million litres of fresh liquid milk.
Dairy Crest will transfer the co-operative's milk processing activities to its existing sites in Cambridgeshire and Gloucestershire.
Currently MDC processes around 200 million litres of milk a year (compared with Dairy Crest's 1.5 billion litres) and the acquisition would further consolidate Dairy Crest's position in the doorstep delivery sector (which accounts for around 15 per cent of the company's turnover).
The prospective deal would see around 125,000 domestic deliveries per year and a further 6,000 retail deliveries added to its existing customer base.
Surrey-based Dairy Crest, which notched up a turnover of £1.27 billion in 2004, also manufactures Cathedral City, the UK's leading branded cheddar cheese, while its Frijj dairy drink and Petit Filous dairy-based dessert brands are also best-sellers in their respective categories.
The acquisition follows a difficult few days for Dairy Crest, which saw its share value plummet by more than 6 per cent at the beginning of last week, after reports surfaced that it could lose out on a new contract to supply Morrisons, the UK's fourth largest multiple retailer, with fresh liquid milk to rival processor Robert Wiseman Dairies.
A spokesperson for Dairy Crest, however, dismissed the reports as "speculation" and told DairyReporter.com that it had heard "nothing at all" from the Bradford-based retailer.
During initial trading this morning, Dairy Crest's share price rose 0.3 per cent, or 1.25p, to 437.25p.
