Large Arla mergers under way in Germany and United Kingdom

Arla Foods is ready with two large mergers which will all at once increase Arla’s turnover by 9 billion DKK a year and will result in more than 2000 new colleagues.

On May 22, 2012, Arla Foods announced that two new large mergers in Germany and United Kingdom are just round the corner. By this, the company takes a quantum leap in their efforts to strengthen their position as one of Europe’s absolutely leading dairy companies and to maintain their position among the world’s leading diaries.

This is about mergers with companies which are, as Arla, owned by cooperative members: Germany’s 8th largest dairy, Milch-Union Hocheifel (MUH), primarily producing so-called UHT products, with about 800 employees and 2,750 cooperative members in Germany, Belgium, and Luxembourg. And the 4th largest dairy in United Kingdom, the cooperative society Milk Link, primarily making cheese products, with about 1,300 employees and 1,600 cooperative members.

Cooperative representatives in the three companies will decide on the mergers on June 26. After that, the competition authorities will have to approve the mergers.

If the mergers are realized, Arla will have cooperative members in the company’s four largest markets, United Kingdom, Sweden, Denmark and Germany as well as Belgium and Luxembourg.

3.5 billion kilos of new litres of milk

According to trade union secretary of the dairy area in Food Workers’ Union NNF, Poul Erik Faarkrog, the mergers will mean that Arla Foods will get a supply of additionally 3.5 billion kilos of milk a year. 

– This is almost as much as the approx. 4 billion kilos supplied in the Danish market today. So this is a giant leap towards realizing the company’s strategy of increasing the turnover by 50 per cent in 2015.

– We are quite content since growth and consolidation are the basis for being able to compete in the global market, to be attractive to the big retailers and by that also maintaining a big number of dairy workplaces in Denmark in the future, says Poul Erik Faarkrog.

Whether the mergers will have consequences on employment is still unknown.

Strong in Northern Germany

The growth is in keeping with Arla’s Strategy 2015, where the objective is to increase the price to the cooperative members by, among other things, strengthening the position in the key markets – United Kingdom and Germany.

– If the cooperative members decide on these mergers, Arla will cement Arla Foods’ position as one of Europe’s most solid dairy companies. We will get a broad circle of owners, delivering a significant quantity of milk, and a very strong mix of products – both for consumers and for the industry. Both Milk Link and Milch-Union Hocheifel are strong, well-run dairy companies. They will strengthen our business with their product range and production sites in Germany and United Kingdom, says Managing Director of Arla Foods, Peder Tuborgh. He stresses that both companies, as Arla Foods, are owned by milk producers.

– Each of the three companies has the objective of creating value for our owners in the form of a strong milk price. This will remain the same, and our possibilities of delivering good results are strengthened if these plans are realized, says Peder Tuborgh.

In keeping with Arla’s Strategy 2015

– Arla will become the biggest dairy company in the United Kingdom and number three in Germany, which is both described as objectives for Arla in 2015, says Peder Tuborgh.

– Moreover, Arla has the objective of reaching a turnover of 75 billion DKK in 2015. If the mergers are approved, the two companies will supply Arla with an extra turnover of about 9 billion DKK. In 2011, Arla had a turnover of 55 billion DKK, and together the companies are expected to create a turnover of about 70 billion DKK in 2013.

Facts

o With the mergers, Arla Foods will grow from 8,024 cooperative members in Denmark, Sweden and Germany to about 12,300 cooperative members in Denmark, Sweden, Germany, Belgium, Luxembourg, and United Kingdom.

o In future, Arla will receive more than 12 billion kilos of milk (against about 9 billion kilos today).

o The name will remain Arla Foods amba.

o The cooperative members of Milk Link and MUH will remain members of Milk Link and MUH. These two companies become members of Arla Foods amba, after the same model as by the merger with German Hansa-Milch in 2011.

o In total the three cooperative companies had a turnover of about 65 billion DKK in 2011.

o Arla’s turnover will grow in Germany from 6 billion DKK to almost 11 billion DKK.

o United Kingdom is today Arla’s biggest market with a turnover of almost 13 billion DKK in 2011. This turnover will increase by almost 5 billion DKK to about 18 billion DKK.

o If the mergers are realized, they are expected to become effective during autumn of 2012. The mergers have to be approved by the competition authorities of the respective countries.

o The new owners will be represented in Arla Foods’ board and council. Milk Link will get two seats in the board (but one vote), and ten seats in the council. MUH will get two seats in the board and nine in the council. Earlier this spring, Arla started a general revision of the democratic system’s structure in the cooperative Arla Foods, and this work continues.

o Arla’s UK milk suppliers, gathered in Arla Foods Milk Partnership (AFMP), will continue the present affiliation to Arla Foods UK plc.

By Pia Rosager, Food Workers’ Union NNF, Denmark