Lakeland dairies and fane valley announce joint venture
The president of the Irish Co-operative Organisation Society has strongly welcomed the announcement today of two joint ventures between two leading dairy processing and agribusiness co-operatives in the region.
Martin Keane was commenting on the news that Lakeland Dairies and Fane Valley Co-operative are to merge their agri-business and dairy operations.
The companies will now produce a billion litres of milk a year between them and 500 tonnes of animal feed; while revenue projections for the dairy business are €670m a year and €175m on the agribusiness side. The companies have not ruled out the possibility of a merger in the future.
'The effect of this decision would help both to consolidate and rationalise the processing and marketing of the milk pool on this island and combine cooperatives agri-business operations, all in the interest of their farmer members,' said Mr Keane.
The ICOS President further noted that this development was in line with the ICOS policy of seeking greater collaboration between milk processors, whether through joint ventures, or fuller scale amalgamations to ensure that scale efficiencies were being achieved in processing and marketing, in the interests of farmers.
Michael Hanley, Chief Executive, Lakeland Dairies said: “The establishment of these strategic joint ventures will create further value and benefits for the producers and customers of both co-operatives. This development underpins our mutually shared ambition to provide the highest possible milk prices to producers. Through this combination, we are adopting an innovative and strategic approach to maximising our efficiencies and overall strength in addressing the growing worldwide market demand for dairy products and food ingredients.”
Statement
Meanwhile, a joint statement from both companies on the announcement read as follows:
Fane Valley and Lakeland Dairies are neighbouring and friendly societies. Each has a heritage of excellence in co-operative farming spanning well over a century and they share common business development aims in the interests of their members, producers and rural communities.
Both co-operatives are highly successful agri-food and agribusiness industry players with excellent manufacturing facilities and complementary strengths and advantages in their various markets.
Recognising the opportunities presented by the continuing growth and expansion of the agri-food industry, on the island of Ireland and internationally, the co-operatives have agreed to a combination of their respective dairy and agribusiness operations for mutual commercial benefit.
Following the approval of the Boards of each society, two specific Joint Venture companies will be established covering two lines of business which will benefit from merged resources.
The Agribusiness Joint Venture
The first Joint Venture is being established by a merger and pooling of both of the societies’ feed manufacturing, sales and stores activities into a major agribusiness company to be managed by Fane Valley. Lakeland Dairies will be a partner and shareholder in the Agribusiness Joint Venture and will also be represented on the board of the new company.
Fane Valley and Lakeland Dairies currently have an annual animal feed manufacturing capacity of 310,000 tonnes and 190,000 tonnes respectively, with a broad range of high performance feed products sold north and south. The merger of both agribusiness operations will create a business with greater efficiencies, larger scale, buying power and the capability for future growth and service delivery across a larger geographic area.
The projected annual revenues of the Agribusiness Joint Venture will be in the order of €175 million.
The Dairy Joint Venture
The second Joint Venture is being established by a merger and pooling of both of the societies’ dairy processing activities and operations, to be managed by Lakeland Dairies. Fane Valley will be a partner and shareholder in the Dairy Joint Venture.
In Northern Ireland, Fane Valley and Lakeland Dairies currently procure 250 million litres and 330 million litres of milk respectively each year for processing into a wide range of value added dairy products and food ingredients, all of which are exported worldwide.
The purpose of the Dairy Joint Venture is to create a business of greater scale and efficiency with the capability to grow and to compete even more intensively on a global basis.
Combined with the total existing Lakeland Dairies milk pool, the Dairy Joint Venture will process over 1 Billion litres of milk annually. This will enhance the overall capacity of both co-operatives to maximise returns from the markets in the interests of their milk producers.
The projected annual revenues of the Dairy Joint Venture will be in the order of €670 million.
Fane Valley milk suppliers will receive the same benefits and provisions as Lakeland Dairies milk suppliers and Fane Valley will have direct representation on the Board of Lakeland Dairies.
Both co-operative societies will otherwise continue to operate on an independent basis and each will support the other in the operation of the Joint Ventures.
It is envisaged that the possibility of a full merger of the two societies will potentially be considered in the future. This would be subject to member approval in each co-operative.
The new Agribusiness Joint Venture with Lakeland Dairies will have a total potential output of over 500,000 tonnes of animal feeds per annum.
The Joint Ventures announced with Lakeland Dairies relate only to Fane Valley’s dairy and agribusiness operations and not to any other entities or holdings owned by Fane Valley Co-operative Society Ltd.
The new Dairy Joint Venture with Fane Valley will process over 1 Billion litres of milk annually with a total milk powder output of over 160,000 tonnes per annum, in addition to a complete portfolio of value-added dairy foodservice products.