FDBusiness.com

Fane Valley, the Northern Ireland farmers’ co-operative, has sold its dairy business to Lakeland Dairies, a fellow co-operative based in the Republic of Ireland, for an undisclosed sum. The addition of the Fane Valley Dairies business, based at Banbridge in County Down, will increase the milk available for Lakeland Dairies to process to 1.1 billion litres a year. Lakeland Dairies will become the third largest Irish milk processor behind Glanbia Ingredients Ireland and Dairygold Co-operative.

Fane Valley and Lakeland had originally proposed strategic joint ventures, announced previously in August 2015, which would have involved both the dairy and agri-business interests of the respective businesses. The simplified deal structure is considered to be a better option.

Michael Hanley, chief executive of Lakeland Dairies Co-operative, comments: “The strategic rationale behind Lakeland Dairies and Fane Valley co-operating to advance the interests of their respective businesses is as strong today as it was in August 2015. It is extremely positive that the boards of both co-operatives have had the foresight to recognise the limitations of the initially proposed joint venture arrangements and the courage to adapt and revise their approach. The current market environment is undoubtedly challenging both for producers and processors. However we have a strong ambition, in Lakeland, to further strengthen our position in global markets as a leading provider of high quality foodservice products and dairy food ingredients.”

He adds: “The agreement we have reached with our neighbouring co-operative, Fane Valley, represents a major step forward for the industry and for Lakeland Dairies, albeit not via the structure initially envisaged. The move will reinforce our continuing commitment to pay the highest possible milk price to all our milk producers through continuing innovation, efficiency and excellence in everything we do.”

Trevor Lockhart, chief executive of Fane Valley Co-operative, says: “Fane Valley and Lakeland Dairies are absolutely convinced that the interests of their respective milk suppliers will be better served in a combined business which can deliver greater economies of scale and enhanced market capability. The option to deliver this through a joint venture model has been the subject of an in depth assessment by both co-operatives working closely together for eight months. In the end, it was evident that some of the complexities involved in establishing and operating a cross-border JV of this nature were going to detract from the key strategic purpose of the merger and the ability to fully realise all commercial synergies. Accordingly, Fane Valley has opted not to take up a shareholding in Lakeland Dairies Co-operative Society as was intended in the original JV proposal.”

Fane Valley will continue to develop and invest in its wider agriculture and food related businesses.

CAPTION:

Pictured left to right: Lakeland Dairies’ group chief executive Michael Hanley and chairman, Alo Duffy, with William McConnell, chairman, and Trevor Lockhart, chief executive of Fane Valley Co-operative.