Connacht Gold seals €20.9m Donegal deal
Co-op finally lands 120m litres of extra milk and 11 stores
Connacht Gold has sealed a deal with Donegal Creameries that sees the co-op finally bag the additional milk supplies it had been hunting for the past few years.
Since last year, the company has attempted to buy at least one of Kerry's liquid milk operations in Limerick and Galway and, more recently, Tullamore Dairies.
In each case, it was out-gunned by rival bids from Glanbia and Arrabawn.
The €20.9m deal agreed over the weekend is broken down into €13.5m cash along with another €7.4m subject to the performance of the business until the end of 2012.
The price tag may surprise some analysts, given that businesses included in the deal only returned a net profit of €1.85m last year. But the businesses will be seen as a perfect fit for Connacht Gold, increasing its milk pool by 48pc or 120m litres.
The 280 new suppliers also bring added efficiencies to Connacht Gold, given that they are nearly 50pc bigger than the average existing Connacht Gold supplier.
The deal also includes the processing plant at Killygordon and 11 retail stores. Nine of these are in Donegal, with two in Northern Ireland.
The sale of the businesses will more than halve Donegal Creameries' annual turnover, and effectively end its involvement in the dairy industry, although it is holding onto the organic dairy based in its 2,000ac Grianan farm.