It would have been a marriage of two dairy giants, collectively processing 14 billion litres of milk a year - a volume equivalent to the whole of the UK’s milk quota.
It would have created the second largest milk processor in the world in volume terms, behind Dairy Farmers of America and ahead of New Zealand’s Fonterra. And it would have created the world’s largest farmer-owned dairy company, with leading brands in worldwide consumer markets - including Yazoo flavoured milk drinks, Lurpak and Cravendale - and a huge presence on the ingredients market.
But the mega-merger of Arla Foods and Campina is no more. The dream that started a year ago at a private meeting in London between the bosses of Arla and Campina - Åke Modig and Tiny Sanders - collapsed on April 21. “The boards of the two companies concluded that joint definitive merger proposals cannot be put to the members’ councils of the two co-operatives at present,” said a statement from
the companies. Modig, CEO of Arla, immediately resigned, but will stay on until a successor is appointed.
There were several stumbling blocks to the deal. These related to concerns at the Danish competition authority; differences in the way the two businesses saw the milk price heading in the future; and management incompatibilities.
Differences in the way the two co-ops are funded by their farmer members was also a key issue. Most co-operatives are funded through regular investment by members via milk price deductions that are diverted into savings accounts. These are held in members’ names and used for security.
Campina has always been financed by its members via this “equity on personal account” mechanism, while Arla Foods has held its equity collectively.
The two companies agreed that a shift from collective to individual equity would take place within Arla. But practical difficulties meant the deal could not be completed within the 100-day timeframe set at the outset, and the proposed merger collapsed.
Chris Walkland
It would have created the second largest milk processor in the world in volume terms, behind Dairy Farmers of America and ahead of New Zealand’s Fonterra. And it would have created the world’s largest farmer-owned dairy company, with leading brands in worldwide consumer markets - including Yazoo flavoured milk drinks, Lurpak and Cravendale - and a huge presence on the ingredients market.
But the mega-merger of Arla Foods and Campina is no more. The dream that started a year ago at a private meeting in London between the bosses of Arla and Campina - Åke Modig and Tiny Sanders - collapsed on April 21. “The boards of the two companies concluded that joint definitive merger proposals cannot be put to the members’ councils of the two co-operatives at present,” said a statement from
the companies. Modig, CEO of Arla, immediately resigned, but will stay on until a successor is appointed.
There were several stumbling blocks to the deal. These related to concerns at the Danish competition authority; differences in the way the two businesses saw the milk price heading in the future; and management incompatibilities.
Differences in the way the two co-ops are funded by their farmer members was also a key issue. Most co-operatives are funded through regular investment by members via milk price deductions that are diverted into savings accounts. These are held in members’ names and used for security.
Campina has always been financed by its members via this “equity on personal account” mechanism, while Arla Foods has held its equity collectively.
The two companies agreed that a shift from collective to individual equity would take place within Arla. But practical difficulties meant the deal could not be completed within the 100-day timeframe set at the outset, and the proposed merger collapsed.
Chris Walkland
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