Arla Foods is seeking a new partner, according to the Swedish business daily Dagens Industri . The news source suggests that the dairy giant is keen to forge a new alliance with a European company in order to achieve its growth targets.

"We can't live up to our long term growth objective only through smaller acquisitions and organic growth," said Arla Foods chief executive åke Modig. "In a member owned business, as Arla Foods is, it is impossible to finance growth through acquisitions.

"That is the reason why we are looking for a merger within the billion dollar companies among other farmer co-operative dairies."

Potential candidates include German firm Nordmilch, which has a turnover of €2.1 billion, the Dutch dairy company Campina with a turnover of €3.6 billion, and Finnish Valio with a turnover of € 1.37 billion.

Three years ago the Swedish cooperative dairy merged with Danish MD Foods and became Arla Foods. The business has a current turnover of €4.97 billion.

Rumours of mergers and acquisitions are rife in the dairy market at the moment. The industry is facing a tough time following the review of the European Common Agricultural Policy (CAP).