The joint venture businesses announced this week by Lakeland Dairies and Fane Valley Co-op represent a genuinely good news stories for all the farmers dealing with both organisations, according to Lakeland chief executive Michael Hanley.
“From a business perspective the potential to add value and deliver efficiencies of scale makes total sense,” he said.
“And the positive impact of these developments will quickly filter down to the farm gate. From a producer point of view there will be a totally seamless transition to the new arrangements.”
Mr Hanley said that it will take until the end of the year to complete the due diligence requirements associated with the establishment of the new businesses.
“No money has changed hands, although all relevant assets have been valued. This is a good deal for farmers in the Lakeland and Fane Valley catchment area.”
Hanley also confirmed that the deal announced this week had been in the offing for some time.
“Momentum started to build, in terms of pulling it all together, about six months ago. Lakeland has had a strong working relationship with Fane Valley for many years. We are close neighbours, after all, and there is tremendous degree of trust between both co-ops.
“The new arrangements did not come about as a result of one organisation putting a specific proposal on the table. Both co-ops mutually recognised that it made perfect sense to move forward on this joint basis.”
The new dairy business will be the second largest processor of milk on the island of Ireland.
“All existing Fane Valley customers will automatically come under the Lakeland contract of supply conditions. And we are also committed to expanding our milk pool still further,” said Hanley.
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 Dairies will be a partner and shareholder in the Agribusiness Joint Venture and will also be represented on the board of the new company.
Fane Valley and Lakeland Dairies 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 merger of both agribusiness operations will create a business with greater efficiencies, larger scale, buying power and the capability for future growth and service delivery across a larger geographic area.
The projected annual revenues of the Agribusiness Joint Venture will be in the order of £125 million.
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 Dairies. Fane Valley will be a partner and shareholder in the Dairy Joint Venture.
In Northern Ireland, Fane Valley and Lakeland Dairies currently procure 250 million litres and 330 million 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 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 1 Billion litres of milk annually. This will enhance the overall capacity of both co-operatives to maximise returns from the markets in the interests of their milk producers.
The projected annual revenues of the Dairy Joint Venture will be in the order of £480 million.