Suitors line up for LacPatrick

Monaghan-based co-op seeks merger as speculation over its financial health mounts

LacPatrick chief executive Gabriel D’Arcy insists the merger plan is not driven by financials. Photograph: Enda O’Dowd

LacPatrick chief executive Gabriel D’Arcy insists the merger plan is not driven by financials. Photograph: Enda O’Dowd

 

LacPatrick Dairies might wish it had generated this much attention for different reasons.

News that the Monaghan-based co-op was seeking a possible merger last week has prompted a flurry of media stories, most speculating negatively about the group’s financial health.

It has also elicited several expressions of interest from rival co-ops, including Glanbia, Lakelands, Aurivo, Dale Farm and an as yet unmasked international buyer, no doubt eager to get their hands on LacPatrick’s 600 million litre milk pool, the lion’s share of which comes from the North.

While the co-op was quick to dress up its new strategy as a natural desire to consolidate the business in the volatile, post-quota milk market, it’s obvious all is not well at LacPatrick, which was formed in 2015 from the merger of Town of Monaghan co-op and Derry-based Ballyrashane co-op.

Some have speculated it may have overstretched itself with a €42 million investment in a state-of-the-art drier in Artigarvan, Co Tyrone, which has been slow to get off the ground.

Chief executive Gabriel D’Arcy insists the merger plan is not driven by financials, pointing to its most recent set of accounts, which suggest the business generated an annual profit of €3 million in 2016.

But LacPatrick is not a publicly-listed company and therefore not subject to the same reporting rigour, prompting speculation that its published numbers may not give a full picture of the group’s financial position.

Others suggest the co-op is and has been behind the curve in investing in value-added product lines, which deliver better returns from the notoriously volatile global dairy market. They point to the fact LacPatrick continually comes down the rankings when it comes to paying suppliers a good price from their milk. This is because the group is tied in to base milk prices more so than others, they say.

Either way, the vultures are circling and things are moving fast with several industry observers suggesting the deal could be hatched within a month.