Arla Foods UK and Arla Foods amba have jointly announced they are in discussions which may lead to a cash offer for the 49 per cent share capital not currently owned by Arla Foods amba.
"We are now in talks with our British subsidiary about a possible bid for the remainder of the shares. We will make further announcements in due course," said Peder Tuborgh, chief executive of Arla Foods amba.
Arla Foods Amba currently owns a 51 per cent majority share in the British company and is seeking to obtain greater control of its supply chain.
This will allow the company to make better investments as it expands within the market, Astrid Neilson, spokesperson for Arla amba, told DairyReporter sister site FoodandDrinkEurope.com.
Arla UK was warned by its Scandinavian parent over poor performances earlier this year, which saw it make a £0.9m loss for the six months ended 31 March.
"We are proactively working with and encouraging Arla UK's management to develop and implement plans to deliver long-term improved performance," Arla Foods said.
Peder Turborgh, chief executive of Arla Foods amba, said no more information was available during negotiations with Arla UK.
"All I can say is that our approach is a natural development from the merger in 2003 between Arla Foods plc and Express Dairies" he said.
Arla Foods is Europe's second largest dairy company, and was first formed in the spring of 2000 following a merger between the Danish MD Foods and the Swedish Arla. The company is owned by approximately 10,600 milk producers in Denmark and Sweden.
Following the merger with Express Dairies in 2003, the UK has become Arla's largest market accounting for 33 per cent of total turnover. Sweden and Denmark account for 22 per cent and 19 per cent respectively while the other European markets account for 13 per cent.