British dairy processor Dairy Crest has acquired Proper Welsh Milk for £325,000 ($490,000) – just hours after the struggling Carmarthenshire-based dairy processor went into administration.
Proper Welsh Milk, which bottles local milk for British retailers including Tesco and Marks & Spencer, went into administration on 1 March 2013 citing cash flow problems. Hours later, Dairy Crest confirmed its acquisition of the business from administrator BDO LLP.
The company was established in 2011. Since then, more than £1m has been invested in its dairy on the site of the former Whitland Creamery. According to Dairy Crest, the company now has a processing capacity of between 10m and 15m litres per year.
It also recently began supplying vitamin D-enriched milk.
The acquisition also looks to have safeguarded 40 jobs at Proper Welsh Milk.
Acquisition “too good to miss”
Dairy Crest revealed earlier this year that it would be seeking a number of “targeted acquisitions” in the next twelve months following the disposal of its French spreads business, St Hubert.
“The sale of St Hubert has significantly strengthened Dairy Crest’s financial position, and has provided a strong foundation for the future. Our aim in deploying the cash from the transaction is to make targeted acquisitions,” said the statement, which was issued in February 2013.
According to Julian Wild, a corporate finance partner with UK law firm, Rollits, Dairy Crest appears to have “snapped up a good deal.”
“Generally, I wouldn’t have seen them making an acquisition in liquid milk, but I suppose it was a deal too good to miss for Dairy Crest,” Wild told DairyReporter.com.
“Dairy Crest has a strong position in branded products, but a less satisfactory position in liquid milk. They have indicated it is a problem area. They have been closing dairies, and they have recently announced that they will be shedding jobs at head office.”
“Having had a bit of a sort out, they now seem keen to get back on the front foot. This acquisition seems a logical move for them,” he said.
“You can only assume that Proper Welsh Milk has over-extended itself, and Dairy Crest has seen an opportunity. It seems a no brainer for them – they have snapped up a good deal,” Wild added.
New product development….
In a statement announcing the acquisition, Dairy Crest CEO Mark Allen has welcomed the addition of Proper Welsh Milk products to its portfolio.
“We are delighted to be the new owners of this business which we believe has a bright future. Our priority is to maintain supply to customers and use this modern dairy in a strong milk field to help us to develop new products, such as vitamin enriched milk. We welcome the employees of Proper Welsh Milk to Dairy Crest and look forward to working with them,” said Allen.
DairyReporter.com approached Dairy Crest regarding the deal, but the company declined to comment further.