Picture: Barry Nicholls, Chief Executive of Milklink
…Deal Secures Capacity to Process 80 per cent of Milk Link Member's Milk…
Milk Link, the farmer-owned dairy co-operative and the UK's third largest integrated dairy business, and Glanbia plc, the international dairy, consumer foods and nutritional products company, have announced today that they are to create a new company called Cheese Company Holdings Limited (CCH) to serve the UK cheese market.
Milk Link will take a 75 per cent controlling stake in CCH for a capital subscription of £16.9 million with Glanbia plc taking the remaining 25 per cent for £5.6 million. Simultaneously, Glanbia plc will sell 100 per cent of Glanbia Foods Limited to CCH. The Board of Directors of CCH will be comprised of six representatives from Milk Link and two representatives from Glanbia plc.
CCH will re-name Glanbia Foods as The Cheese Company, which will be the second largest cheese producer in the UK, with strong positions in cheddar, Stilton and British territorial cheeses, supplying the retail, food service and ingredient sectors. It will operate four cheese processing facilities in Taw Valley, Devon; Lockerbie; Melton Mowbray; and Malpas; and a major packing facility in Oswestry. The company will employ approximately 1,000 people.
The deal is part of Milk Link's strategy to provide milk price stability, long-term security and added value profits to its members through the creation of a vertically integrated dairy business. The Cheese Company creates a balanced product portfolio for Milk Link, consisting of liquid milk, cheese, fresh dairy products, dairy ingredients, butter and milk powder. It now has the capacity to process up to 80 per cent of its member's milk output and will handle in excess of 2 billion litres of milk p.a.
Milk Link's acquisition of a 75 per cent controlling stake in CCH positions it as the UK's leading and fastest growing integrated dairy business and secures 620 million litres of additional milk processing capacity for its members milk.
Milk Link and Glanbia Foods bring complementary strengths to The Cheese Company. Glanbia brings excellent cheese making skills and extensive facilities capable of producing the full range of British cheeses, as well as strong relationships with major retailers. Milk Link has established expertise in developing and manufacturing a wide range of dairy products, first class relationships with major retailers and food manufacturing companies, a growing capability in category management, sales and marketing and is a recognised expert in milk management and logistics.
The transaction is an important strategic step towards addressing the current lack of vertical integration in the UK milk processing industry, enabling Milk Link's primary milk producers to share in the ownership and benefits of value added processing. It provides an opportunity to establish and maintain trust between producers, processors, retailers and customers and will contribute significantly to the creation of an orderly, integrated dairy market in the UK.
The transaction is conditional on approval by the Irish competition authorities and the Milk Link Member Council. It is expected that these will be obtained, and the transaction completed, by early March 2004.
Barry Nicholls, Milk Link Chief Executive commented:
"This joint venture secures Milk Link's position as the UK's premier farmer-owned integrated dairy business. Moving into cheese production complements our substantial, existing liquid milk and ingredients businesses, as well as our fresh dairy products business through our strategic alliance with Arla Foods. It also allows us to build upon our increasingly strong customer relationships in the retail and food services sectors.
"By securing an additional 620 million litres of milk processing capacity, we are now able to process and add value to up to 80 per cent of our members' milk. This allows them to benefit from a long-term secure outlet for their milk together with the additional margins available from processing it into added-value products. Through this investment we are well placed to deliver our long-term objective of providing financial security to our members".
Glanbia Group Managing Director, John Moloney, commented:
"This transaction will facilitate our strategic focus on high growth areas such as consumer products and in particular the nutrition market. At the same time it allows us to maintain both access to the UK market for our Irish cheese production and a continuous supply of whey products to serve our growing nutritional and ingredients businesses, as well as milk for our mozzarella business. We are confident that, as a result of this joint venture, Glanbia will retain a significant stake in a stronger, more integrated business which will compete successfully in the UK cheese market."
Rex Ward, Milk Link Farmer Director, commented:
"In 2001 Milk Link member's approved a strategy to develop Milk Link into an integrated dairy business to ensure the financial security that we could not deliver through being simply a large milk broker. They recognised that standing still was not an option and that we had to take greater control of the whole dairy chain to ensure that a greater proportion of the profits created by the UK dairy industry are returned to farmers. Today's deal means that we are close to achieving the objective of being able to process the majority of our members milk."
