Glanbia set to scoop CMP in €10m deal

Glanbia is set to take on CMP from Dairygold in a €10.05m deal, subject to approval from the Irish Competition Authority.

Glanbia will operate the milk, cream and juice brands of CMP (Cork Milk Producers).

This development includes the relevant sales and distribution assets of CMP but excludes the production and chill facility.

Under the new arrangement Dairygold's 130 liquid milk suppliers will continue to supply Dairygold and Dairygold will sell the 6.15 million gallon CMP liquid milk pool on to Glanbia.

Glanbia will continue to supply the CMP milk, dairy and juice brands into the Cork area, including continuing CMP door-to-door deliveries.

In addition Glanbia and Dairygold have also confirmed that they have agreed in principle to enter into a contract manufacturing arrangement for elements of their respective milk processing activities.

This is subject to finalisation of contract negotiations, which are ongoing.

Under the terms of this agreement Dairygold will supply a volume of cream to Glanbia annually, beginning in 2005, for the contract manufacture of Dairygold branded butter and butter oil at Glanbia's Ballyragget butter production facility.

In addition Glanbia will purchase a volume of whey from Dairygold for processing.

Glanbia will supply Dairygold a volume of milk for contract manufacturing into Glanbia dairy products at Dairygold's Mitchelstown plants, from 2006 onwards.

As appropriate both parties will make capital investments in their respective facilities and both parties will continue to maintain their own existing separate commercial arrangements with milk suppliers and customers.

Commenting, Glanbia plc Group Managing Director, John Moloney, said: "This development regarding the CMP brands and the contract manufacturing agreement with Dairygold are in line with Glanbia's strategy of maximising scale and efficiency in the most appropriate way.

"The CMP brands will further strengthen Glanbia's Consumer Foods' customer offering as one of Ireland's leading suppliers of chilled foods and beverages to the retail and food service sectors."

Jerry Henchy, Dairygold chief executive, said: "The decision to exit the liquid milk business was not taken lightly but in light of the highly fragmented nature of the sector, growing volumes of imported milk and the downward price pressure exerted by the multiples on the margins that can be achieved, it is the right business decision for Dairygold and its liquid milk suppliers.

"The Glanbia Dairygold co-operation agreement is a very positive move in the Irish dairy sector.

"The route to rationalisation was generally perceived as being through takeovers or mergers. We have developed a pragmatic solution where we will be happy to co-operate with neighbours where appropriate to share facilities and production assets to contract manufacture dairy products as cost-efficiently as possible."