Milk groups plan major merger


01 March 1999


Milk groups plan major merger

By Vicky Houchin

DAIRY farmers are being asked to back the proposed merger of five independent milk groups.

In the merger, announced in London yesterday (Monday), United Milk Producers plans to join Camelot, Somerset, Stour Vale, and Wessex Milk to create
a new company – United Milk plc.

Directors from the five companies said the new venture would offer farmers significant benefits,
including more negotiating power when selling milk to processors.

The directors are now asking all existing farmer-suppliers to invest a total of £900,000 in an effort to
launch the new company with a capital base of £1.2 million.

That represents an average investment of about £1100 for each of the 836 farmers who already sell milk through the five companies involved.

The remaining £300,000 in funding will come from pooling existing company assets once the new milk
buying group is formed.

If all goes to plan, the new company will have a combined milk volume approaching one billion litres.

It will boast an estimated 8% share of the current raw milk market, equivalent to about one sixth of
that controlled by the biggest milk buyer, Milk Marque.

But producers should not expect milk prices to increase immediately as a result of the merger, said
Richard Ashworth, who will become United Milks chairman.

Such a move would only be likely if, as is hoped, the new company becomes involved in quota
operating, he added.

Those behind the proposed merger hope it will be seen as one of the most positive developments for
producers since the milk sector was deregulated in the 1980s.

Over recent years the dairy industry has undergone a major rationalisation, which has led to accusations
that processors are dictating milk prices to farmers.

Mr Ashworth said the merger was “a logistical and necessary response to the market developments of
the last few years, which have resulted in an never-ending spiral of falling farm-gate prices and
considerable uncertainty in the industry.”

If the farmers on whose support the merger now depends give their seal of approval in a ballot later
this month, the new company will be up and running soon afterwards.

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