A number of dairy co-ops have now declared that they are interested in entering into negotiations with LacPatrick regarding a possible tie-up or acquisition of the troubled Monaghan-based co-op.

Aurivo is the latest to declare its hand, issuing a statement this week confirming that the board has agreed to participate in a formal process to assess strategic options.

“We believe that there would be a very good fit between the businesses of LacPatrick and Aurivo,” read the statement.

It comes after Dale Farm said last Friday that it had an interest. Lakeland is also thought to be looking closely at the LacPatrick business, while there are also rumours that a Chinese infant formula company has made an approach.

What has become clear in recent days is that it is the chair of LacPatrick, Andrew McConkey, and the board, who are driving the process of seeking a joint venture or tie-up with another co-op.

The Irish Farmers Journal understands that a five-member committee has been set up to lead negotiations on behalf of LacPatrick. This committee includes the board chair, his two vice-chairs, but does not include the chief executive, Gabriel D’Arcy. He has been tasked with continuing to run the business in the interim period.

While LacPatrick indicates that the business is financially sound, at least in the short term, it is not in a position to pay a strong milk price. That creates the risk that producers will opt to leave, and it is that milk pool that is one of LacPatrick’s main assets at present.

Its other main assets include a strong LP brand for milk powder into Africa, a long-standing contract to supply around 160m litres of milk to infant formula business of Abbotts in Cavan, and its new £30m milk dryer at Artigarvan. However, it is that latter investment which has helped to drain ?nances. The 2014 accounts of Town of Monaghan co-op (before the merger with Ballyrashane to form LacPatrick) show that it had €32.4m cash in the bank.

With the ability to process over 500m litres of milk per year, the dryer needs raw material to operate efficiently, and it has left LacPatrick with significant spare processing capacity.

Time will tell whether it was a wise investment, or a millstone around the neck.

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