FDBusiness.com

Müller UK & Ireland Group has agreed to acquire the dairy operations of Dairy Crest Group for £80 million in cash. The acquisition, which is subject to approval by the relevant competition authorities and the shareholders of Dairy Crest, comprises the fresh liquid milk, flavoured milk including the FRijj brand, bulk and potted cream, bulk butter and milk powder businesses of Dairy Crest. It includes Dairy Crest’s dairy facilities at Severnside, Chadwell Heath, Foston and Hanworth together with around 70 depots.

Müller UK & Ireland Group is wholly owned by Germany-based Unternehmensgruppe Theo Müller. It operates nine dairies and 10 depots in the UK and employs almost 6,000 people across four business units – Müller Dairy, Müller Wiseman Dairies, Müller Minsterley and TM Telford.

In the year ended 31 March 2014 Dairy Crest’s Dairies operations recorded revenue of £944.8 million and product group profits of £0.6 million excluding profits from selling surplus properties which were £18.2 million. At 31 March 2014 the total assets employed in the Dairy Crest’s Dairies operations which are being sold were £253.5 million and the net assets employed were £112.8 million.

Müller believes that combining its Müller Wiseman Dairies business and Dairy Crest’s dairies operations will benefit customers, consumers and employees of both businesses whilst offering supplying farmers greater opportunity and security. The businesses have largely complementary footprints and the acquisition will provide an opportunity to achieve material cost savings and efficiency improvements.

Bringing the two dairy operations together will enhance the merged business’s ability to compete and will ensure that customers continue to receive quality products at low prices.

The combined business will also provide a platform for higher investment in production efficiencies which will unlock the potential for substantially higher levels of innovation, product development and exports of dairy products made in Britain, with milk from British dairy farms.

Ronald Kers, chief executive of Müller UK & Ireland Group.

Heiner Kamps, chief  executive  of Unternehmensgruppe Theo Müller, says: “This acquisition underlines our ambition to further grow the Unternehmensgruppe Theo Müller in its core markets and it extends our position as an increasingly important competitor in the dairy sector. “In tandem with this growth we are placing significant emphasis on becoming an employer of choice at what is an exciting time in our further development as an international fresh food company.”

Ronald Kers, chief executive of Müller UK & Ireland Group, says: “We aim to create a more competitive, sustainable, efficient and innovative dairy processor in the UK which will generate real benefits for customers, consumers, employees and suppliers. We look forward to working with the excellent team in Dairy Crest’s dairies operation. We are concerned that the dynamics of the UK fresh milk market are unsustainable for dairy processors in the mid to long term and this acquisition will allow us to reduce our costs, increase our efficiencies and invest in the future.”

Mark Allen, chief executive of Dairy Crest.

The disposal will leave Dairy Crest focused on its profitable, predominantly branded, cheese and spreads operations. It will also grow its revenue and profits by continuing to develop whey-based products, such as demineralised whey powder and galacto-oligosaccharide, for the fast growing global infant formula market.

Dairy Crest’s cheese and packet butter and spreads businesses recorded revenues of £442 million and product group profits of £56.1 million in the year ended 31 March 2014. This product group includes Dairy Crest’s market leading Cathedral City brand, Davidstow, Clover, Country Life and the fast growing Frylight one calorie cooking spray.

“The combination of our Dairies operations with those of Müller Wiseman Dairies will create efficiencies and economies of scale that will help to create a more sustainable UK dairy sector that is better placed to compete on the global stage,” comments Mark Allen, chief executive of Dairy Crest. “The disposal will allow Dairy Crest to focus on continuing to grow our successful and innovative branded cheese and spreads operations. We will also deliver additional added value sales through our whey investment. We are confident that this focus will deliver further medium term profit growth for our shareholders.”