Nordmilch, Humana Milchunion call off German merger

Related tags Arla foods Milk Dairy Dairy farming

Germany's two largest dairies have terminated an agreement to
merge. Nordmilch, Germany's leading dairy co-operative, and Humana
Milchunion were set to merge in January 2005, but since have cited
"timing" and "restructuring issues" as contributing to the
collapse, as Tom Armitage reports.

As reported by​ last month, the two companies had already signed a declaration of intent to merge, and were due to submit an application to the Bundeskartellamt - the German competition authorities - during the last few weeks.

But following intensive joint discussions, the companies have since claimed that a merger would not have brought a "sustainable strengthening of economic power to their member farmers."

Despite the announcement, the two companies stated that they, "do not want to lose sight of a potential common future,"​ and have underlined their future intention to sustain their co-operation within the ice cream and whey sectors.

The merger, which would have made the joint company the third largest milk co-operative in the EU - worth an estimated €4.9 billion - would have given the group an immediate head-start in the imminent milk price war, as the European milk sector braces itself for Common Agricultural Policy (CAP) reform in 2005.

Any planned merger would also have had serious implications for both the €20.2 billion German domestic milk sector, and also the other major European dairy co-operatives, such as France's Lactalis group and Danish-Swedish co-operative Arla Foods.

When details of the Humana and Nordmilch merger were initially disclosed through the German press, Arla Foods' managing director, åke Modig, quickly signalled his intentions to keep the company at the forefront of any merger activity.

"The trend in Europe's dairy industry points towards two blocks - one driven by the French dairies and one led by the German, Dutch or Scandinavian dairy industries, where we'll play an active role,"​ he commented at the time.

Even in light of the collapse of the German deal, Modig's stance still remains unchanged: "We can expect more mergers within Europe and we intend to be part of that process,"​ he said in an Arla Foods press statement released last week.

"However, it's crucial for us to find an equivlent partner, where the farm gate price is on a par with ours,"​ he added.

Related topics Manufacturers Consolidation

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