Food group Glanbia is to take over the CMP liquid milk, cream and juice branded business of Dairygold Co-Operative Society for €10.05m. The deal is subject to approval from the Competition Authority.
The two companies have also 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 talks, which are still ongoing.
Up to 90 jobs may be lost by the Dairygold group after this arrangement is finalised. 38 jobs could be lost at the CMP milk plant in Cork city while a further 20 to 30 jobs may go at the company's Mallow butter plant. The Mallow plant will continue to produce milk powder during the peak summer months.
Another 20 jobs could be lost in other operations at Dairygold also.
Under the new arrangement, Dairygold's 130 liquid suppliers will continue to supply Dairygold, and Dairygold will sell the 6.15 million gallon liquid milk pool on to Glanbia.
In a statement this morning, Glanbia said it would continue to supply the CMP milk, diary and juice into the Cork area, including continuing CMP door-to-door deliveries.
The two companies have also 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 talks, which are still ongoing.
Under the terms of this agreement, Dairygold will supply a volume of cream to Glanbia every year, beginning this year, for the manufacture of Dairygold butter and butter oil at Glanbia's Ballyragget butter production plant. Glanbia will also purchase whey from Dairygold for processing.
Glanbia will then give Dairygold a volume of milk for manufacturing into Glanbia dairy products at Dairygold's Mitchelstown plants, from 2006 onwards.
'This development regarding the CMP brands and the contract manufacturing agreement with Dairygold are in line with Glanbia's strategy of maximising scale and efficient in the most appropriate way,' commented Glanbia's Group Managing Director John Moloney.
'The CMP brands will further strengthen Glanbia's consumer foods offering. Likewise, the contract manufacturing agreement is consistent with our strategy of developing further industry alliances and co-operation to achieve mutual efficiencies,' he added.
Dairygold's chief executive Jerry Henchy said the company's 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,' he said.
'The Glanbia Dairygold co-operation agreement is a very positive move in the Irish dairy sector. Calls for consolidation of the industry has been made for many years, but progress to achieve meaningful rationalisation has been slow,' Mr Henchy said.
Glanbia shares closed up five cent at €2.97 in Dublin.
