Lakeland Dairies and Fane Valley link up and could consider full merger

Dairy processing and agribusiness co-operatives — Fane Valley and Lakeland Dairies — yesterday announced two major new joint ventures with projected annual revenues of €845m.

Fane Valley, based in Banbridge, Co Down, and Lakeland Dairies, with group head offices in Killeshandra, Co Cavan, said the move will enhance their economies of scale and overall competitiveness.

Two specific joint venture companies will be established covering two lines of business which will benefit from the merged resources.

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 will be a partner and shareholder in the agribusiness joint venture, which will have a projected annual turnover of of €175m, and will also be represented on the board of this new company.

Fane Valley and Lakeland 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 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 with Fane Valley as a partner and shareholder. In Northern Ireland, Fane Valley and Lakeland currently procure 250m litres and 330m 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, with projected annual revenues of about €670m, 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 1bn litres of milk annually. Fane Valley milk suppliers will receive the same benefits and provisions as Lakeland milk suppliers and the co-op will also have direct representation on the Lakeland Board.

Both farmer owned co-ops 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.

Describing the agreement as far-sighted, Fane Valley chief executive Trevor Lockhart said the combined strength and backing of both co-ops will ensure success for their agribusiness and dairy operations and will underpin the future success of their business.

Michael Hanley, chief executive, Lakeland Dairies, which operates across 15 counties north and south, said joint ventures will create further value and benefits for the producers and customers of both co-ops.

“This development underpins our mutually shared ambition to provide the highest possible milk prices to producers,” he said.