First Milk has bought Dairy Crest's own-label cheese business for nearly £62m.
supported the move but farmers fear it will force them to accept a lower milk price and are considering alternatives. Under the terms of the deal, DC's Aspatria and Haverfordwest cheese plants will be transferred to First Milk, along with the Maelor packing plant, which will continue to pack and distribute branded Dairy Crest cheese.
First Milk members will be asked for their approval on 11 October. Chief executive Peter Humphreys said: "This'll be good for farmers, retailers and consumers."
Own label cheese would benefit from the time and talent that First Milk planned to bring, he added. "We'll bring expertise to the sector that has been lacking so far. "
That would mean developing cheeses that match consumer demand for convenience, local provenance and taste. Humphreys pledged to give retailers better value, although he ruled out price cuts.
The deal is being financed from borrowing and members' capital contributions. Farmers will be asked to pay 0.5ppl into a capital account for two further years.
DC will run the supply side of the business for another year, but from September 2007, farmers will be asked to switch to First Milk. Humphreys admitted they would be getting less for their milk but appealed for them to take account of the promise of dividends from the processing part of the business.
The new cheese business made a £3.4m profit last year on £192m turnover.
But some Cumbrian dairy farmers said they felt betrayed by the sale, because they faced a price cut of up to 2ppl if they transferred. They have been in contact with Partners in Cheese, which aims to build a 150 million litres-a-year cheese plant in the country.