Golden Vale set for milk merger

GOLDEN Vale, which earlier this week pulled out of a £130 million (~165 million) acquisition in Britain, has moved ahead with the rationalisation of its dairy business with the merger of its Creamline liquid milk business in Northern Ireland with the Express Dairies milk business.

Golden Vale will have a 20 per cent equity share in the merged company, Dale Farm Dairies. The 80-20 split in the merged business represents the value agreed between Express and Golden Vale. In terms of the assets being merged, Golden Vale is contributing £4.7 million sterling (~7.8 million) to Express's £10.1 million sterling.

While Golden Vale is contributing 31 per cent of the net assets for its 20 per cent stake, those assets are substantially less profitable than the Express assets, with the £400,000 sterling profits from the Golden Vale business accounting for just 11 per cent of the merged group's combined operating profits.

Golden Vale's decision to get out of direct processing of liquid milk reflects the intensely competitive market in Northern Ireland. Golden Vale is a minor player in that market, where Express is the leading supplier from a modern dairy in Ballymena. The merger will allow the combined entity to reduce costs by concentrating production on Express's Ballymena dairy and the closure of Golden Vale's dairy in Lurgan with the loss of about 80 jobs.

Golden Vale managing director Mr Jim Murphy said: "The liquid market has become increasingly competitive, with significant pressure on margins. "Against this background and in line with our ongoing effort to reduce costs and achieve the scale and efficiency levels required to compete in the sector long term, we have entered into this joint venture. We believe the combined business will be better positioned to compete successfully in the market."