Connacht Gold boosts milk pool with €13.5m deal

CONNACHT Gold Co-op has boosted its milk pool to 370 million litres by acquiring Donegal Creameries’ milk and retail store businesses for €13.5m, ending months of stop-start negotiations.

Sligo-based Connacht Gold has bought Donegal’s 120m litres milk pool, the liquid milk processing facility at Killygordon and 11 retail stores — nine in Donegal and two in Northern Ireland.

Connacht Gold chairman Padraig Gibbons said the deal is of major strategic importance and is a big step towards consolidating the co-op’s consumer foods, dairy ingredients and retail stores businesses.

Mr Gibbons said: “As a result of this acquisition, Connacht Gold will have a total milk pool of 370m litres and will be the leading specialist producer in the Irish market.

“The acquisition also increases the number of Connacht Gold retail and agri-business stores to 41 across eight counties in the Republic as well as Fermanagh and Tyrone in Northern Ireland.”

The acquired Donegal milk and retail businesses had a turnover of €69.3m and net profits of €1.85m for the year ended December 31, 2010, but have struggled since due to tightening margins in the increasingly competitive milk retail sector.

The Donegal Creameries’ dairy division recorded an operating loss of €970,000 for the first six months of the year, compared to an operating profit of €350,000 in the first half of 2010.

The cash consideration of €13.5m which Connacht will pay Donegal is subject to completion adjustments and further contingent earn-out payments of up to €7.4m, dependent on the operating and financial performance of the milk business during the year to December 31, 2012.

Connacht Gold chief executive Aaron Forde said the acquisition forms part of the co-op’s strategic plan to grow the consumer foods, dairy ingredients and retail businesses.

It follows internal investment of €70m in recent years, which has led to new markets, products and customers.

The businesses being acquired from Donegal Creameries involve 280 milk suppliers and Aaron Forde said Connacht Gold is committed to integrating the new acquisitions into the co-op as smoothly as possible. The deal is subject to regulatory approval from the Competition Authority which is expected to take a month.