Food groups Glanbia, Lakeland and United Dairy Farmers could bid for milk processor Lacpatrick, which wants to merge or join forces with another player.
Lacpatrick chairman Andrew McConkey said on Wednesday that an emergency meeting of its board decided to pursue options that could include “partnerships, joint ventures, mergers” or other opportunities.
Industry sources speculated that Mr McConkey’s statement would prompt milk processors such as Glanbia, Lakeland and United Dairy Farmers to consider bidding for Monaghan-headquartered Lacpatrick.
Observers believe that Killeshandra, Co Cavan-based Lakeland could be an "obvious" bidder for Lacpatrick as their supplier bases overlap in places.
Similarly, both Co Kilkenny-based Glanbia and Belfast-headquartered United buy milk from farmers in regions bordering on those from where Lacpatrick draws its supplies.
Lakeland noted Mr McConkey’s statement, and added that Lacpatrick had a “very substantial business with a strong heritage in dairy farming”. Neither Glanbia nor United commented.
Approaches
Mr McConkey said the board meeting on Tuesday, April 17th, agreed to identify the best way forward for suppliers, shareholders, staff and customers. He stressed that business was continuing as normal. “The decision by the board of Lacpatrick comes following a number of approaches from international and national companies from the sector in recent months.”
Lacpatrick’s move did not surprise the industry. The co-op processes milk bought from farmers based in an area encompassing counties Derry, Fermanagh, Monaghan and Tyrone.
The processor recently cut milk prices for March by 2 pence sterling a litre to 25p for Northern Ireland suppliers and 2.5 cent to 30.25 cent a litre for those in the Republic.
Mr McConkey blamed the cuts on an exceptionally weak market, especially for milk powder. He told suppliers that since October prices paid to farmers were “well ahead” of market returns.
Cutting prices
In the co-op's April newsletter he points out that European countries such as Germany, the Netherlands, France and Britain have been "pumping out milk since last summer", oversupplying the market and cutting prices.
Lacpatrick's financial position remains strong. The co-op invested €40 million last year in a new drier used to make powdered milk, which it exports to Africa, the Middle East and Far East.
Its balance sheet for the end of 2016 shows that it had net assets of almost €75 million, including cash and stocks of €15 million. Lacpatrick’s operations earned a profit of €2.9 million that year.
The co-op’s board and management believe that merging with another operator would boost scale, and position it better to combat falling prices.
Co-ops Town of Monaghan and Co Derry-based Ballyrashane merged to form Lacpatrick in 2015. It has operations in Derry, Dublin, Fermanagh, Monaghan and Tyrone.
