It’s almost 30 years since Lakeland Dairies was formed following the merger of Killashandra co-op and Lough Egish co-op in 1990. During the 1990s, Lakeland was led by CEO Dan Buckley, who was one of the loudest voices in the Irish dairy industry at the time, calling for greater consolidation at processing level.

Buckley wanted to see consolidation happen at a regional level where a small number of large processors would emerge in different areas of Ireland to handle greater volumes of farmer’s milk. It may have taken another two decades, but Buckley’s vision of regional consolidation in Ireland is starting to emerge with the news on Thursday that LacPatrick has entered into exclusive merger talks with Lakeland Dairies.

While the outcome is not certain, a merger of Lakeland and LacPatrick would create a combined entity processing circa 1.8 billion litres of milk per annum and with sales in excess of €1bn. This new entity would overtake Cork dairy co-op Dairygold to become the second largest dairy processor in Ireland behind Glanbia.

Not only that, but a merger of Lakeland and LacPatrick would create the largest milk processor in Northern Ireland.

Powerhouse

Since Lough Egish and Killashandra co-ops first merged in 1990, Lakeland Dairies has evolved into a regional dairy powerhouse in the northern half of the island via a steady process of merger and acquisition.

The first major milestone for the Cavan-based co-op came in 2002 when Lakeland spent a considerable €33m acquiring the Bailieboro milk processing facility from Kerry Group.

This acquisition further transformed Lakeland, adding an additional €100m in sales to the business and almost doubling the co-ops milk pool at the time. A year later in 2003, Lakeland paid €18.5m to acquire Pritchitts, a Northern Ireland-based food service business.

The Pritchitts business was merged with Lakeland’s existing food service division making it the largest UHT supplier in the UK and Irish food service market. The Pritchitts acquisition brought an additional 100 farmer suppliers into the Lakeland co-op, supplying a combined 70 million litres of milk per annum.

Today, food service accounts for about a third of Lakeland’s annual sales with key markets in the UK, Middle East, Europe, Asia and China.

Dairy quotas

For more than a decade after the Pritchitts acquisition, Lakeland focused its investments and capital on expanding capacity within its own business and improving existing facilities in the lead up to the ending of milk quotas.

A new opportunity arose in 2015 when Lakeland entered into joint venture talks with Fane Valley, the Northern Ireland farmer co-op. However, Lakeland ended up acquiring the dairy business of Fane Valley outright in a €13m deal.

The Fane Valley acquisition brought with it an additional milk pool of 240 million litres and another processing facility in Banbridge in Northern Ireland. This helped grow Lakeland’s overall milk processing pool to 1.2 billion litres last year, with half coming from farmers in Northern Ireland and the other half coming from suppliers in the Republic of Ireland.

Should the merger with LacPatrick go ahead and win shareholder approval, it will further cement Lakeland Dairies position as the regional dairy powerhouse in the northern half of the island of Ireland.

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