Arla close to sealing deal for Allgäuland

12-Sep-2011 - Last updated on 14-Sep-2011 at 14:16 GMT

Arla Foods announced today that it was a "step closer" to acquiring German dairy firm Allgäuland-Käserien, after the last of the latter's constituent co-operatives voted in favour of joining the dairy giant.

In a statement today, Arla Foods said that members of Allgäuer Bergbauern-Milch (the co-operative that previously rejected Arla's offer of an undisclosed amount) voted in favour of joining the company.

An Allgäuland spokeswoman told DairyReporter.com that members of the co-operative voted 80 per cent in favour of Arla's takeover offer, thus safely crossing the 75 per cent threshold necessary to secure majority acceptance.

She added that EU competition authority approval was the final hurdle for the takeover - and would likely take a couple of weeks - but that Allgäuland didn't anticipate any difficulties.

Torben Olsen (pictured) head of Arla Germany, said he welcomed the decision, and Arla said in a statement: "Over the coming days and weeks, the final part of the process is expected to fall into place."

"Arla's target is that the deal will include contracts of a minimum of 250m kg milk. The acquisition is subject to approval by the EU competition authority."

Bankruptcy risk averted

An Arla Foods spokesman said the successful vote last night was the "big milestone for the acquisition to come through" and said the company was now finalising contractual details in relation to the acquisition prior to EU competition authority scrutiny.

He added that an agreement could be signed on Friday, and that 250m kg milk was the amount of milk that Arla was interested in buying; Allgäuland's farmer members now had to decide how they could fulfil that demand.

If Arla Foods succeeds in acquiring Allgäuland, the Danish-Swedish dairy giant will save the €253m turnover German dairy from the threat of bankruptcy.

DairyReporter.com understands that the company has debts of around €70m across its six co-operatives.

Arla launched its takeover bid – which is supported by Allgäuland’s board – in July, to increase its footprint within the German market.

Significant German development

The Danish-Swedish firm wishes to acquire Allgäuland for the “important potential” it sees within its speciality cheese business, both in Germany and abroad.

But a fortnight ago one of Allgäuland co-operatives narrowly rejected Arla's offer, despite board-level support within the German firm for the deal, although the remaining five co-operatives voted by a 98-99% margin in favour of the takeover.

Germany is Arla’s fourth largest market (behind Sweden, Denmark and the UK respectively) with a DKK 2.1bn (€281.9m) turnover.

Earlier this year, Arla merged with dairy co-operative Hansa-Milch in a significant move that saw it gain access to German milk producers serving 80m consumers.

Announcing its half-year (H1) results on September 1, Arla said the move marked the “first stage in the significant development of Arla’s activities in the German market,” with the Allgäuland bid a further step.

Arla reported revenues of DKK 27bn (€3.62bn) for the first half of 2011 (H1), as against DKK 24bn (€3.22bn) in 2010.

However, profits fell to DKK497m (€66.7m) for the first half year, compared with DKK697m (€93.56m) last year.