14 June 2002

Milk merger yes vote

THE merger of Zenith Milk and The Milk Group to form Dairy Farmers of Britain (DFB) is to go ahead.

Although only about 30% of the combined membership voted in person or by proxy at a special meeting on Monday (June 10), 98% of those voted in favour of the deal. Subject to final court approval, DFB will commence trading on July 1, when members will be asked to sign a financial agreement to raise capital to invest in processing.

"Those producers voting in favour fully recognise the need for a brand new strategy and plan of action to reverse the deepening industry crisis," says David Stern, chairman of the new co-op. "They also recognise that much of the responsibility for any recovery plan lies in producers own hands."

Despite the low turnout, DFB is confident that its members will sign the financial agreement. It blames the scanty attendance on silage-making and the fact that most farmers expected the merger to be approved regardless of their vote. About 60% of the co-op attended briefings over the past three weeks, and were "entirely positive", says Zenith communications manager Louise Burrows.

By signing the financial agreement, producers have a choice of guaranteeing 5p/litre or loaning 1.25p/litre in cash. This money, along with existing capital from Zenith and The Milk Group, will potentially raise a bank loan of £145m, which DFB is already looking to use to expand into the processing sector.

"Until we get the agreements back we cant invest," says Miss Burrows. "But we are actively investigating opportunities."

Alex Solomon, of the Federation of Milk Groups, says the 30% turnout was pretty good for the dairy industry, and for 98% to vote in favour was a "great result". "It is clear from our membership that we need to see consolidation in that sector. There is universal support for changing the structure of the dairy supply chain."

Milk prices and contracts for the 4000 DFB members, who will produce 2bn litres of milk/year, will be harmonised to achieve total price parity from Apr 1, 2003. &#42