Arla, Campina disband prospective dairy deal

Related tags Campina Arla foods Mergers and acquisitions Denmark

Arla Foods and Campina, two of Europe's largest dairy
co-operatives, have abandoned their much-hyped plans to merge,
after failing to secure the confidence of their respective boards,
Tom Armitage reports.

Danish-Swedish dairy co-operative Arla Foods, Europe's leading dairy co-operative, said that although a "satisfactory result"​ had not been achieved, there was still a possibility that dialogue could be resumed in the future.

Both Campina, based in Zaltbommel, Netherlands, and Arla refused to give any further indication as to why the talks collapsed, citing confidentiality agreements - although it is understood that the two parties failed to agree on a complicated financial technicality​.

In February, Arla's committee members raised concerns regarding the accountability of a portion of Campina's net capital - more specifically its membership system, which they claimed left the firm's DKK1.13 billion (€152 million) shareholder funds at risk.

Despite this, however, Campina said at the time: "Although this issue is complicated, we have 100 per cent confidence that the merger will proceed as expected."

It would now appear, however, that Arla did not share its optimism, previously warning that although it would be willing to adopt a similar membership system to Campina, the process could indeed take several months to implement.

Furthermore, Arla was recently reported to have asked Campina for €322 million - a figure which it said was needed to implement the necessary changes in order to bring its existing membership model in line with Campina's.

The decision to abandon the merger therefore comes as no surprise, particularly after the two dairy firms rescheduled​ a crucial merger vote to discuss "unresolved issues"​ last month.

Both Campina and Arla's respective boards of representatives were due to vote on the merger proposal on 6 April earlier this month, with unanimous approval required from both groups in order for it to proceed.

"Although we regret the fact that the merger had to be called off, we are convinced that Campina has enough opportunities and strength to continue its successful course of international growth, innovation and efficiency,"​ said Campina's CEO, Justinus Sanders.

Set against the backdrop of slashed milk prices and reduced subsidies from Brussels, the move to merge was seen as a positive move for both firms, creating the world's second largest dairy company behind Swiss giant Nestle, as well as the world's largest dairy co-operative.

Arla Foods, which notched up a €6.2 billion turnover in 2003, against Campina's €3.7 billion, would have been the merger's biggest contributor - although subsequent factors, including a weak dollar and strong domestic competition, have somewhat diminished its influence.

åke Modig, Arla's managing director, also announced his resignation - something which was widely expected after the conclusion of the merger talks, regardless of whether a favourable outcome was obtained.

"The board and I have agreed that I leave the company now that the outcome of the merger process has been decided. However, I will remain managing director until the board has appointed my successor,"​ he said.

Related topics Manufacturers Arla Foods

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