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Friday 14 December 2018

UK competition authorities to probe Lakeland/LacPatrick merger

LacPatrick was formed from the merger of Town of Monaghan Dairy in the Republic and Ballyrashane Dairy in the North. It processes more than 600 million litres of milk from more than 1,000 farmers, roughly half on each side of the Border
LacPatrick was formed from the merger of Town of Monaghan Dairy in the Republic and Ballyrashane Dairy in the North. It processes more than 600 million litres of milk from more than 1,000 farmers, roughly half on each side of the Border
Ciaran Moran

Ciaran Moran

The UK Competition and Markets Authority (CMA) has announced that it is investigating the anticipated acquisition by Lakeland Dairies (N.I.) Limited of LacPatrick Dairies Co-Operative Society Limited.

In October Dairy processors LacPatrick and Lakeland agreed terms on a merger, after LacPatrick put itself up for sale earlier in the year.

The new company will be the second-largest dairy processor on the island of Ireland, behind Glanbia, after terms of the merger were agreed following exclusive discussions between the parties started in June.

However, regulatory approval as well as shareholder approval on both sides will be required and the combined business will have turnover in excess of €1bn.

Now, in its Initial Enforcement Order served on the dairy processors last week, CMA said it has reasonable grounds for suspecting that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in Lakeland Dairies (N.I.) Limited (Lakeland) and LacPatrick Dairies Co-Operative Society Limited (LacPatrick) ceasing to be distinct.

The CMA said the Order does not prohibit the completion of the transaction provided that Lakeland and Lakeland Dairies Co-Operative Society Limited and LacPatrick observe a number of restrictions.

The proposed merger of Lakeland Dairies Co-Operative Society Limited and LacPatrick Co-Operative Society Limited has also been notified to the Competition and Consumer Protection Commission in Ireland.

LacPatrick Dairies, which was formed in 2014 with the merger of Ballyrashane and Town of Monaghan co-ops, recently said it was engaging a cost-saving exercise to ensure the survival of the co-op. Part of that saw it announced it will not be paying bonuses to its 400 employees this Christmas. And it has eliminated the practice of “sick-time” pay.

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“This is a cost-saving exercise to ensure the survival of the co-op, said a LacPatrick spokesman.

“These measures have to be taken because of a serious downturn in the dairy market.”

A spokesman for the Irish Farmers’ Association in Monaghan said there is huge concern and anger over the decision to cut the milk price to suppliers, and it will be discussing with the Ulster Farmers’ Union in the North what possible action that may be taken.

A spokesman for the employees said: “We are shocked by the decision to cut sick pay allowances...we feel this is not acceptable.”

Announcing the deal last month LacPatrick chairman Andrew McConkey said it would give the co-op's farmers "the necessary security to make long-term business decisions and provides stability for continuing progress in dairy farming for the next generation".

"With an enlarged milk pool and well invested dairy processing sites on both sides of the Border, the new co-operative will be a co-op of scale working in the long term best interests of dairy farmers, ensuring global market access and serving our valued customers with an even greater capability and an expanded range of high quality, value-added dairy products," Mr McConkey said.

Lakeland CEO Michael Hanley said the new group would have "substantial cash flow to underpin the development of the business".

"The business will have considerable potential to increase revenues and generate the cost savings necessary to ensure competitive milk prices for our dairy farmers in the future. It will continue to ensure market access to the United Kingdom, Europe and the world.

"Both co-operatives have excellent facilities, technologies and resources with strong synergies across our milk processing footprint and in the markets we serve at home and abroad.

"We will be able to expand the potential of our overall portfolio of products, covering food ingredients, food-service and consumer foods," Mr Hanley added.

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