Arla closes in on UK subsidiary, as shares leap

By Chris Mercer

- Last updated on GMT

Related tags: Arla, Arla uk, Arla foods, Milk, Arla foods uk, Europe

Talks that could see Scandinavian dairy group Arla Foods buy out
its UK subsidiary were at an advanced stage Monday, the firm
reported, as investors appeared to back the move.

Arla confirmed rumours that it was close to signing a deal to buy Arla UK, one of the country's top three dairy firms, for 71 pence per share - totalling around £430m.

A deal would enable Arla to take greater control of its supply chain and perhaps improve efficiency in the UK after a poor performance in the first half of 2006.

Arla UK's share price was 68 pence midday Monday and has risen substantially since rumours surfaced that its Scandinavian parent wanted to buy out the 49 per cent stake it did not already own.

The rise reflects investor confidence that Arla can make its UK arm more profitable.

Arla Foods warned the UK team last year that a £0.9m loss in the six months up to 31 March had been unsatisfactory, despite an increase in branded sales.

"We are proactively working with and encouraging Arla UK's management to develop and implement plans to deliver long-term improved performance,"​ the group said.

Any problems in the UK have the potential to offset Arla Foods' recent success in mainland Europe, Asia and the US. Britain is now Arla Foods' largest market, accounting for a third of its sales revenue thanks to successful brands such as Lurpak butter and Cravendale milk.

Arla UK improved in the second half of last year after offloading its doorstep milk delivery business to Dairy Crest, but fierce cost pressures have continued to cause problems for all dairy firms in the country.

Related topics: Manufacturers, Arla Foods

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