Golden Vale Foods and Dairy gold are believed to have put out informal "feelers" on the possibility of a joint venture in milk processing. Industry sources say the initiative follows Golden Vale's recent announcement that four options are being considered for the future of its loss-making milk processing division.
But Golden Vale's chief executive, Mr Jim Murphy, was out of the country yesterday and not commenting on the issue while Dairygold's chief executive, Mr Denis Lucey, has denied that merger moves are under way again between the dairy processors.
Golden Vale, through the Investment Bank of Ireland, is understood to be talking to several milk processors, exploring the options put forward by Mr Murphy. "Everyone in milk processing would be looking at what Golden Vale is offering," one source said.
For many years, even before Golden Vale became a plc and Dairygold decided to remain a co-operative, there was speculation that these major, neighbouring, milk processors would merge. But the on-off relationship came to nothing.
Golden Vale reported a loss of £0.7 million (€0.9 million) before charges and tax for 1999 for its butter and milk powders business in contrast with a few years before when the division contributed two-thirds to the groups' profit. Following these results, Mr Murphy announced the four options being considered: a cut in milk prices to producers within the plc structure; a joint venture on a formal or informal basis with another processor; selling the Charleville, Co Cork, milk processing assets back into the co-operative and the plant's closure. The latter is considered the least likely as the plant has a long-term future, is on an out-of-town site and has the most modern effluent handling facilities.
In a statement outlining the proposals, Mr Murphy added: "The lack of profitability in the milk processing industry, together with the need to create conditions for re-investment is now well recognised. Various ideas and possibilities are being explored at industry level and I can assure you that Golden Vale will play its full part in seeking out solutions which reduce costs and make the industry more competitive in the future."
Such consolidation of milk processing would go some way towards meeting some of the recent proposals from the Irish Co-Operative Organisation Society (ICOS) on the rationalisation of milk processing State-wide, nationally, although it would fall far short of the serious rationalisation suggested.
The Farmers' Journal reported on Thursday that a member of Dairygold's board had confirmed that a merger of both companies' milk processing and related businesses had been under ongoing discussion in the co-operative.
