The proposed deal between Lakeland and LacPatrick Dairies, on track to go to a vote of shareholders this September, will make the new entity the largest buyer of milk in NI, with a milk pool of over 1bn litres.That will take it ahead of Dale Farm, which currently processes approximately 800m litres of milk.
The proposed deal between Lakeland and LacPatrick Dairies, on track to go to a vote of shareholders this September, will make the new entity the largest buyer of milk in NI, with a milk pool of over 1bn litres.
That will take it ahead of Dale Farm, which currently processes approximately 800m litres of milk.
The announcement that Lakeland and LacPatrick were entering into exclusive talks came last Thursday. While Lakeland has the much stronger hand, it is not a takeover, but an amalgamation or merger of the co-ops.
Agreement
The fact that it is a merger probably makes it easier for LacPatrick to get agreement on the deal from their shareholders. It is understood to help smooth the process, current LacPatrick suppliers will be offered a number of positions on an interim board.
The bigger challenge might be to convince Lakeland shareholders to go with the deal. The majority are Republic of Ireland suppliers, who will have to be convinced of the merits of a new arrangement, that will effectively see around 60% of the milk pool in NI.
On the one side, there is the debt of LacPatrick, believed to be over €30m, but on the other side, a milk pool close to 600m litres, a new £30m drying plant in Artigarvan (that solves any processing concerns around Brexit), plus modern facilities at Ballyrashane and Monaghan.
In NI, Lakeland has traditionally operated at the top end of the Irish Farmers Journal milk league tables, and has a strong record of holding on to NI suppliers. But those factors might not be that relevant to the shareholders in the Republic of Ireland.
For LacPatrick, the decision to opt for Lakeland over other bidders was probably partly driven by concerns about holding on to its milk pool throughout a negotiation process. There might have been more instability had a different co-op been involved.
Despite that, there is a realisation that some of the pool could be lost, particularly a number of former suppliers to Ballyrashane Creamery in north Antrim.
Both Aurivo and Dale Farm were in fast over the weekend. Dale Farm has already taken on two suppliers (based in Coleraine and Ballymoney) with a combined milk pool of 2m litres annually, while Aurivo has taken on a 1m-litre supplier in the Bushmills area. All three had previously served notice to LacPatrick of an intention to leave.
Read more
Analysis: What could LacPatrick-Lakeland merger look like?
Lakeland Dairies: a history of growth through mergers and acquisitions
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