Milko and Arla to discuss merger

The Boards of Milko and Arla are proposing a merger of the two dairy cooperatives. Milko’s financial situation is critical and Milko has therefore contacted Arla with a view to investigating the possibility of a merger.

As a result of unsatisfactory profit development in 2011 and in order to avoid a future liquidity issue, Milko has approached Arla with a view to investigating the possibility of a merger.

“At Milko, our finances have been imbalanced for some time and in recent years we have been forced to take several radical cost-cutting initiatives. However, sales development has continued to be very weak in 2011 and the Board has therefore decided to dramatically reduce the milk settlement price,” states Milko spokesman Lars Reyier.

He continues:

“The number of dairy cows in Sweden has fallen by almost 50% since 1985. As elected representatives we therefore have both a mandate and a responsibility to seek out modern and unselfish structural initiatives on the dairy market that can provide our members with the best possible market and settlement price for the milk they produce.”

Principles of the merger

The basic principle of the merger is that the Milko members will become cooperative members and owners of Arla Foods on an equal footing with existing Arla members. The Milko members will receive the Arla milk settlement price from Day One after the merger has been completed and approved by Konkurrensverket (the Swedish Competition Authority). For further details, please refer to the attached merger proposals.

“Arla has the strength and the structure required to develop the Milko company and to receive milk from the dairy farmers who will transfer to Arla as a result of the merger, regardless of the volume of milk they supply. A merger is in line with our ambition to inspire the Swedish people on food issues and to create conditions for continuing to produce milk in the region ”, explains chairman of Arla Foods’ Board of Directors, Åke Hantoft.

Information meetings will be held

In the coming weeks in accordance with Swedish labour market regulations, co-determination talks (called MBL negotiations) will be held with the Milko employees and information meetings will be held to notify the Milko members. On 28 June, the Arla Board will meet to reach a decision on the merger agreement. On the same day, an initial ballot will be held at Milko, at which a 50% majority will be required for the merger process to continue.

At a second ballot on 14 July, a 2/3 majority will be required. On 4-5 October, the merger will be discussed at a meeting of the Arla Board of Representatives.

The deal must also be approved by Konkurrensverket, the Swedish Competition Authority. This applies to all major mergers and company acquisitions. Arla will not be able to accept new members from Milko until the Swedish Competition Authority’s investigation is complete.

Milko and Arla have already agreed on Arla’s purchase of the Sundsvall dairy. Arla will take over operations there on 1 July. That business deal is, however, entirely separate from the merger negotiations.