(l/r) Lakeland Dairies CEO Michael Hanley and chairman Alo Duffy, with Fane Valley chairman William MgConnell and CEO Trevor Lockhart

Irish milk processor Lakeland Dairies has partnered with fellow co-operative Fane Valley to create two joint venture businesses with combined revenues of £605m.

The two groups are combining their dairy and agri-business operations in a bid to enhance economies of scale and increase competitiveness for their farmer members and milk producers.

Farmer-owned and controlled Lakeland, which currently collects and processes more than 800 million litres of milk a year across 15 counties in Ireland and Northern Ireland, will manage the dairy JV. It will be established by merging and pooling both of the societies’ dairy processing activities and operations – with capacity to process more than one billion litres of milk annually and projected annual revenues of £480m.

The agribusiness will be managed by Fane, which is Northern Ireland’s second largest feed manufacturer, and will merge the two groups’ feed manufacturing, sales and stores activities.

Fane and Lakeland currently have an annual animal feed manufacturing capacity of 310,000 tonnes and 190,000 tonnes respectively, with projected yearly sales for the JV coming in at £125m.

“This development underpins our mutually shared ambition to provide the highest possible milk prices to producers,” Lakeland CEO Michael Hanley said. “Through this combination, we are adopting an innovative and strategic approach to maximising our efficiencies and overall strength in addressing the growing worldwide market demand for dairy products and food ingredients.”

Fane chief executive Trevor Lockhart added: “This far-sighted agreement represents the strong commitment of Fane Valley and Lakeland Dairies to support our members, milk producers and customers through the development of an even more competitive market position on a joint venture basis. The combined strength and backing of both co-operatives will ensure success for our agribusiness and dairy operations and will underpin the future success of our business.”

Lakeland and Fane said there was a possibility of a full merger of the two societies in the future.