1 March 2002

Express steps up efforts to obtain

farmer investment

By Robert Harris

EXPRESS Dairies is stepping up efforts to encourage farmers to invest in its business after recent takeover talks collapsed.

Speaking to farmers weekly on Monday, Express chief executive Neil Davidson said he wanted to explore ways to involve farmers in the business. "And we are not just talking about non-core business.

"There is clearly a strong desire from farmers to invest in processing. The time has come in the evolution of the British dairy industry for imaginative solutions."

Informal discussions had and were taking place with a number of farmers leaders, he said. "We want to forge closer links with farmer groups."

But he said he had not held talks with Farmers for Action leader David Handley, who has been trying to drum up enough support to enable UK dairy producers to buy Express.

Mr Handley claims many farmers have pledged money, but says there is no timetable in place for a formal approach as yet.

Whether Express eventually ends up in farmers hands remains to be seen, said a spokesman for the Federation of Milk Groups. "All groups have indicated their longer-term strategy is to be involved in milk processing. Im sure if people come up with a viable commercial proposition they will end up talking."

The news that recent takeover talks had ended surprised many, said one analyst.

Express received an approach from an unnamed suitor in January, Scandinavian co-op Arla Foods was soon widely reported to be preparing an offer of 35p/share, worth almost £105m, as well as taking on £200m of debt.

"Some observers were convinced this was going to go ahead. Express did, too. It seems they had all the press releases lined up."

Another observer reckoned Arla had lost its nerve. "Its UK operation is probably losing £6-£10m and it probably felt market conditions didnt warrant this sort of investment."

No one from Arla wished to comment on the "recent speculation". Mr Davidson said it was business as usual for Express, although rationalisation, at some point, remained inevitable.

Express shares fell 25% last Friday morning after talks broke down, and slipped further to 17p by Wednesday (Feb 27).

Meanwhile, Arla has announced it is investing £40m in a new superdairy at Stourton, on the edge of Leeds. For that money the new plant, due to be commissioned by the end of 2004, should have an annual capacity of at least 400m litres.

The announcement follows similar investment by Robert Wiseman Dairies at Droitwich and Dairy Crest at Severnside. The new site will replace Arlas 100m-litre Leeds plant, which has no room for expansion.

"Arla is doing a bit of catch-up," said the analyst. "If it is going to continue to participate in the market it needs to do something." &#42