Fane Valley and Lakeland in £125m feed merger

Two long established Irish agricultural co-operatives, active in both the Province and the Republic, are to merge their feed manufacturing and milk processing interests into two separate joint venture companies from the end of this year.  What they term a “significant and strategic development” is designed to increase both scale and competitiveness, and could lead to a full merger of both societies in due course.

The companies are the £553 million Fane Valley Co-operative Society headquartered in Armagh and €626m (£447m) Lakeland Dairies, with its base in Co Cavan.

Fane Valley will lead a merged animal feed business bringing the combined feed manufacturing, sales and retail store operations into a single 500,000 tonne capacity business with projected annual revenues of £125m. At the same time, Lakeland Dairies will manage the combined milk processing facilities with a total capacity of over 1 billion litres and a £480m turnover.

Fane Valley Feeds manufactures 310,000 tonnes of feed through two mills: the new facility at Omagh, built in 2010, and a site in Newry that has been upgraded over recent years. Lakeland Dairies has a single 190,000 tonne mill at located in Lough Egish in Co Monaghan. Fane Valley will establish a new limited liability company in Northern Ireland, and will transfer its agribusiness assets into this company known as the Agri JV. At the same time, Lakeland Dairies will establish a wholly owned subsidiary to house its Lough Egish feed mill and two store outlets. This business will then be acquired by the Agri JV.

The Agri JV will be managed by Fane Valley, with Lakeland Dairies as a partner and shareholder with board representation. The partners say the merger will create a business with larger scale and buying power, greater efficiencies and the capability for future growth and service delivery across a larger geographic area, both north and south of the border.  The existing individual feed brands and farm store formats (Fane Valley has 13 outlets, Lakeland two) will be retained.

The Dairy Joint Venture merges both societies’ dairy processing activities and operations. Lakeland Dairies will acquire Fane Valley’s 250m litre Armaghdown Creameries facility in Co Down, and run it alongside its existing two plants – the 330m litre creamery at Newtownards in Northern Ireland (the site of its new £8m global logistics centre) and the 470m litre factory at Bailieborough, Co Cavan in the Republic.  Lakeland will be in day-to-day control, with Fane Valley as partner, shareholder and board member.

The partners say the Dairy JV creates a business of greater scale and efficiency, with the capability to grow and compete even more intensively on a global basis – already much of the value-added dairy products and food ingredients made are exported worldwide.  Fane Valley milk suppliers will receive the same benefits and provisions as those of Lakeland Dairies.

The joint ventures do not affect the rest of the two co-operatives’ businesses. Fane Valley has interests in meat processing, food service and renewable energy. “Both societies will otherwise continue to operate on an independent basis, and each will support the other in the operation of the joint ventures,” says a joint company statement.

“This far sighted agreement represents the strong commitment of Fane Valley and Lakeland Dairies to support our members, milk producers and customers through the development of an even more competitive market position on a joint venture basis,” says Trevor Lockhart, chief executive of Fane Valley.  “The combined strength and backing of both co-operatives will ensure success for our agribusiness and dairy operations and will underpin the future success of our business.”

For Lakeland, chief executive Michael Hanley adds: “The establishment of these strategic joint ventures will create further value and benefits for the producers and customers of both co-operatives.  This development underpins our mutually shared ambition to provide the highest possible milk prices to producers.  Through this combination, we are adopting an innovative and strategic approach to maximising our efficiencies and overall strength in addressing the growing worldwide market demand for dairy products and food ingredients.”

Posted on August 14, 2015 and filed under Feed, Company News, Top Story.