Anne Bruce and Ed Bedington
Major rationalisation of Arla and Express Dairies operations are expected if their proposed merger goes ahead.
The merger between Arla Foods' UK subsidiary and Express, two of the UK's leading dairy companies, is set to create a £1.3bn giant, Arla Foods UK, with a 39% share of the liquid milk market.
Investec analyst Michael Landymore said the merger would give Express a partner that could afford to invest in it. He added: "This has been a long time in gestation, four into three will help improve overcapacity in the dairy sector."
He said the deal, which could be worth about £100m, is likely to be modified.
Express Dairies shareholders will vote on the proposals, which would give Arla UK a 51% stake in Express, at an extraordinary general meeting on April 24.
Express Dairies executive director Tim Smith said the merger was likely to clear by June or July, after European Competition Commission scrutiny.
He said a preliminary internal review of the merger had showed overlap in Arla and Express's dairy facilities, and "a fairly significant rationalisation would take place over the next three years".
One analyst predicted two or three closures of Arla facilities when Arla opened a new plant in Stourton, Leeds next year.
Express's London dairies, and two smaller Arla dairies in the north could also be in line for closure, he said. With Arla and Express both having head office functions, Smith said there would be "significant" job losses.
Express Dairies group executive team, headed by chairman Sir David Naish and chief executive Neil Davidson, will relocate to Arla's headquarters in Leeds.
Arla is remaining tight-lipped about potential job losses and structural changes. Arla Foods' CEO Mikael Christiansen said it was "business as usual" for both companies at the moment. Smith said Express has continued talks with Arla ever since Arla decided not to pursue a bid for Express in February 2002. He said: "Dialogue continued till we reached a point where we felt we could take it further. We are two parties with complementary skills and this is the most compatible opportunity for rationalisation in the sector."
Christiansen said Arla had followed Express's development for some time. "The merger brings together the opportunity to be the most efficient dairy company in the country."
The merger was welcomed by farmers and retailers. Jon Arnold, Sainsbury's dairy trading manager, said: "Rationalisation in milk processing is necessary to reduce overcapacity."
{{NEWS }}
Major rationalisation of Arla and Express Dairies operations are expected if their proposed merger goes ahead.
The merger between Arla Foods' UK subsidiary and Express, two of the UK's leading dairy companies, is set to create a £1.3bn giant, Arla Foods UK, with a 39% share of the liquid milk market.
Investec analyst Michael Landymore said the merger would give Express a partner that could afford to invest in it. He added: "This has been a long time in gestation, four into three will help improve overcapacity in the dairy sector."
He said the deal, which could be worth about £100m, is likely to be modified.
Express Dairies shareholders will vote on the proposals, which would give Arla UK a 51% stake in Express, at an extraordinary general meeting on April 24.
Express Dairies executive director Tim Smith said the merger was likely to clear by June or July, after European Competition Commission scrutiny.
He said a preliminary internal review of the merger had showed overlap in Arla and Express's dairy facilities, and "a fairly significant rationalisation would take place over the next three years".
One analyst predicted two or three closures of Arla facilities when Arla opened a new plant in Stourton, Leeds next year.
Express's London dairies, and two smaller Arla dairies in the north could also be in line for closure, he said. With Arla and Express both having head office functions, Smith said there would be "significant" job losses.
Express Dairies group executive team, headed by chairman Sir David Naish and chief executive Neil Davidson, will relocate to Arla's headquarters in Leeds.
Arla is remaining tight-lipped about potential job losses and structural changes. Arla Foods' CEO Mikael Christiansen said it was "business as usual" for both companies at the moment. Smith said Express has continued talks with Arla ever since Arla decided not to pursue a bid for Express in February 2002. He said: "Dialogue continued till we reached a point where we felt we could take it further. We are two parties with complementary skills and this is the most compatible opportunity for rationalisation in the sector."
Christiansen said Arla had followed Express's development for some time. "The merger brings together the opportunity to be the most efficient dairy company in the country."
The merger was welcomed by farmers and retailers. Jon Arnold, Sainsbury's dairy trading manager, said: "Rationalisation in milk processing is necessary to reduce overcapacity."
{{NEWS }}
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