The proposed merger between Arla Foods amba and Milk Link has been a long time in the pipeline and was not hurried along by the takeover of Robert Wiseman by Müller earlier this year, Arla and Milk Link’s CEOs have insisted.

The surprise Wiseman deal which kicked off the latest round of consolidation in UK dairy in January did not change talks between Arla and Milk Link “one iota”, Arla Foods UK CEO Peter Lauritzen told The Grocer. “For us, this has been an ongoing process over the past five years,” he said. “We always thought we needed another leg to stand on - in cheese - and we looked at all the possible options, but the best fit for us was Milk Link.”

Milk Link CEO Neil Kennedy added that the two businesses had had a long-standing positive working relationship, including a joint venture at Westbury Dairies, and had highly complementary operations across liquid milk, butter and own-label cheese.

Merger talks had started in earnest towards the end of last year, Lauritzen and Kennedy said. Lauritzen would not be drawn on which other businesses Arla had considered, but a spokesman for fellow co-op First Milk said the company had not been approached by Arla.

The merger - key facts

  • Creates the largest player in UK dairy, with a turnover of more than £2bn
  • Combined milk pool of 3.2 bn litres a year - about 24% of total UK production
  • Operations across 15 cheese, fresh milk, long life milk and ingredients production and packing facilities
  • Brings together Arla’s liquid milk and branded businesses - Cravendale, Anchor and Lurpak - with Milk Link’s leading own-label cheese business
  • Milk Link will hold roadshows across the country to inform its members of the rationale behind the merger
  • The deal will be voted on by Milk Link farmer members and Arla’s board of representatives on 26 June

The merger between Arla and Milk Link will now require approval by the co-ops’ members as well as European competition authorities. Kennedy said draft papers had already been submitted, with a decision expected at the end of the summer. “We are not anticipating the merger will raise any competition issues, as we are operating in complementary rather than overlapping sectors,” he added.

Although Milk Link is predominantly active in own-label cheese, Arla is tipped to push into branded cheese. Lauritzen would not be drawn on plans for branded Cheddar while merger approval was pending but said he was open to looking at brands.

This could put pressure on Dairy Crest’s cheese business, home to the market-leading Cathedral City. Arla and Milk Link will oust Dairy Crest as the biggest player in UK dairy if their merger goes ahead, but Dairy Crest corporate affairs director Arthur Reeves said losing its number-one spot could be beneficial and allow the company to get on with its strategy with fewer distractions.

“It’s nice to be the market leader, but it also has its drawbacks,” said Reevers. “Everyone is looking for the largest buyer in the market to lead on milk price.”

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