5 July 2002

£30m Express deal puts Milk Link in big league

By Olivia Cooper

MILK Link has agreed a £30m deal with Express Dairies, in which it will acquire over 600m litres of processing capacity.

This will make Milk Link the UKs fourth largest, integrated dairy business, and will allow it to process 50% of its members milk.

Under the terms of the deal, Milk Link will acquire the entire long-life milk business of Express Dairies, including the sites at Crediton, Devon, and Kirkcudbright, Scotland. It will also take over the creamery and ingredients plant at Staplemead, Somerset – capable of processing 420m litres of milk a year.

In a joint venture with Express, it will also manufacture, market and develop fresh added-value consumer products including cream and flavoured milk from the site at Frome, Somerset.

The acquisition builds on Milk Links takeover of Tanner Foods in March this year, and gives it the ability to balance supply and demand of its members milk through its own processing facilities, said chief executive, Barry Nicholls.

"This gives us the opportunity to develop new, added-value products. We also see significant potential in the currently under-developed long-life market." Although demand for UHT milk is low in the UK, 80% of households use it on the Continent, so there is considerable opportunity to increase exports, he added.

Express Dairies will concentrate on its core business of supplying fresh milk and cream to supermarkets as well as developing its doorstep deliveries, said chief executive, Neil Davidson.

The £30m will also go some way to reducing Expresss £169m debt. But it is not just a sale of assets, as the joint venture will provide considerable room for development in the added-value market, he added. "Flavoured milk is one of the fastest growing sectors of the market, and we do have other ideas in the pipeline."

The move has been widely welcomed by the industry, which sees it as a progressive step, in line with recommendations in the Curry report. "Since deregulation the milk industry has been in disarray, so I am delighted to see this very real step of progress towards greater integration," said Sir Donald Curry.

New co-op, Dairy Farmers of Britain, is also looking to raise capital to invest in processing, and found Milk Links success very encouraging. "It is good news for the industry. They have chosen to use the same structure as us, and this now proves that it can work," said chief executive, Chris Bird.

The deal is subject to approval by Milk Links Member Council and Express Dairies shareholders, who will vote at special meetings on July 23. Over 50% of Express shareholders and 66% of Milk Links member council will need to vote in favour for the deal to go ahead. If approved, the companies are scheduled to complete on July 26. &#42

Rex Ward (left), a farmer director at Milk Link, and Express Dairies chairman, Sir David Naish, pictured at this weeks Royal Show, soon after the £30m deal between the two firms was announced.