DAIRY

Milk Group/Zenith merged operation will have boosted borrowing power New co-op looking to beef up presence in processing sector The main short-term aim of the plans to create a major new milk co-operative through the merger of Northern co-op Zenith and The Milk Group based in Cheshire is to reduce milk collection costs through rationalisation. But little secret is made of the longer term aim of building up the new co-op's involvement in milk processing. At present The Milk Group processes about 10% of its milk supplies through subsidiaries Nene Valley Foods and Lubborn Cheese, the largest Brie cheese producer in the UK. Future milk processing would take place alongside the sale of milk direct from farms to many of the leading public dairy companies in Great Britain. The planned new business is being advised by Dutch co-op bank Rabobank and the intention is to retain a small proportion of each member's monthly milk cheque to create a capital fund. In addition, the borrowing power of the co-op will be further enhanced by a limited liability agreement from members. It is estimated this would give the new co-op the ability to offer creditors backing for up to £120m. The processing arm of the co-op will be operated by a plc in which farmer members would then hold shares. If the 4,200 farmer members agree, the merger will go ahead from March and will control about 2.4 billion litres of milk a year, nearly 20% of UK milk supplies. {{CANNED GOODS }}