Lakeland Dairies Co-operative Societies, Ireland, acquired the Fane Valley Dairies, also based in Ireland, effective May 1.
This simplified deal structure is considered to be a better option than the originally proposed strategic joint ventures announced in August 2015, which would have involved both the dairy and agri-business interests of the respective businesses.
“The strategic rationale behind Lakeland Dairies and Fane Valley co-operating to advance the interests of their respective businesses is as strong today as it was in August 2015,” says Michael Hanley, chief executive of Lakeland Dairies. “It is extremely positive that the boards of both co-operatives have had the foresight to recognize the limitations of the initially proposed joint venture arrangements and the courage to adapt and revise their approach.
The agreement we have reached with our neighboring co-operative, Fane Valley, represents a major step forward for the industry and for Lakeland Dairies, albeit not via the structure initially envisaged. The move will reinforce our continuing commitment to pay the highest possible milk price to all our milk producers through continuing innovation, efficiency and excellence in everything we do. We look forward to working with our colleagues in Fane Valley to progress the mutual success of our milk suppliers in the years ahead.
“Fane Valley and Lakeland Dairies are absolutely convinced that the interests of their respective milk suppliers will be better served in a combined business, which can deliver greater economies of scale and enhanced market capability,” adds Trevor Lockhart, chief executive of Fane Valley Co-operative. “The option to deliver this through a joint venture model has been the subject of an in-depth assessment by both co-operatives working closely together for eight months. In the end, it was evident that some of the complexities involved in establishing and operating a cross-border joint venture of this nature were going to detract from the key strategic purpose of the merger and the ability to fully realize all commercial synergies. Accordingly, Fane Valley has opted not to take up a shareholding in Lakeland Dairies Co-operative Society as was intended in the original joint venture proposal.
The principal goal of Fane Valley has been to create a dairy business [that] is better positioned to deliver maximum returns to milk suppliers in the years ahead. Recognizing this, the board has decided to focus its attention on supporting Lakeland to drive forward the expanded dairy business.”