FrieslandCampina and Arla investigate merger – News milk

FrieslandCampina and Arla investigate merger – News milk
FrieslandCampina and Arla investigate merger – News milk

FrieslandCampina

News milk

Today 12:00 o’clock – Klaas van der Horst 1 comment

The boards of FrieslandCampina and Arla are investigating the possibility of a merger. Those directly involved are silent or call everything ‘speculation’, but reliable sources report to Foodbusiness.nl that Sybren Attema, chairman of FrieslandCampina, (photo) has been in talks with colleague Jan Toft Nørgaard for several weeks. The management of both concerns is also involved.

A possible merger will lead to the largest dairy company in the world with a combined turnover of €22.7 billion, slightly more than that of the current number 1, Lactalis. Seventeen years ago, a merger between Arla and then Campina was investigated, which backfired on Danish resistance. Once again, the members of both cooperatives have the last word, but this time there are different considerations.

FrieslandCampina and Arla are almost the same size, but also very different companies.

Global Dairy Top 20
When publishing this year’s Global Dairy Top 20, Rabobank expressed the expectation that FrieslandCampina will probably be overtaken by competitor Arla next year in terms of turnover. The Scandinavian company has recently been performing stronger and more stable than its Dutch counterpart. In addition, it is better positioned for further growth. FrieslandCampina is attached to the Netherlands in terms of supply base, with an edge in Germany and Belgium. There are not many opportunities to strengthen the raw material supply. On the contrary, the Dutch supply base is under increasing pressure, mainly because of the nitrogen problem. The scenario outlined by Rabobank is still possible, but there is a good chance that it will turn out very differently

No Chefsache, but chairman’s job
In cooperatives, such conversations always start between the chairmen. That’s how it went this time, according to reports. Sybren Attema must have realized fairly quickly that a merger with another dairy cooperative is the only sensible way forward and that Arla is the logical interlocutor. This has been hinted at in the past, but the need was not there then.

norgaard
Arla chairman Jan Toft Norgaard.

Beacons are being moved
FrieslandCampina has been busy changing the course since Attema took office, for example by indicating that it is again looking for new members. Which is a completely different signal than was broadcast in previous years. The implementation of the intentions is not going well yet, because first the towering financial wall around FrieslandCampina has to be lowered. Only a few dairy farmers are willing to buy for €15 or €21 per 100 kilos of milk, while there is also sufficient ‘free’ supply. Moreover, the prospect of sufficient return is not great.

In addition to the changing expressions, the cooperative’s attitude towards members with a more intensive business is also changing. “For a long time we felt like second-class members,” says a dairy farmer from Brabant. “That changes something again.” Nevertheless, FrieslandCampina continues to lose members and milk. The question is whether the company will exceed 9 billion kilos of member milk this year. This volume has been stated as the lower limit to be able to implement the Strategy 2030. Otherwise, the fixed costs will become too high, for example, and the guaranteed price will then become even more difficult to pay.

No FC Arla
For FrieslandCampina there seems to be a greater need to take a new step forward than for Arla. The possible merger company is certainly not called FC Arla, but a merger can have many advantages for both companies. Simply in the form of synergy, market power and as a party in export markets. Moreover, cooperatives in particular are having an extra hard time these days and both are faced with major climate challenges. Standing stronger together is always a legitimate reason. Arla has a strong strategy and execution, FrieslandCampina has the technology and dairy knowledge. In this regard, the head office in Århus and the innovation center in Wageningen are discussed.

A possible merger does require the approval of the European Commission. And if this is agreed, ‘remedies’ can be expected again. Business units must be divested or markets shared to counteract too much dominance.

Arla later stated in a response that the ‘speculation about a merger between Arla and FrieslandCampina is 100% inaccurate’, but does not provide any further explanation, for example about the possibility of other variants of cooperation.

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farmersbusiness.nl

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Klaas van der Horst

Klaas van der Horst is a passionate follower of the dairy market and everything related to it. He searches for the news and interprets the developments.

© DCA MultiMedia. This market information is copyrighted. It is not permitted to reproduce, distribute, distribute or make the content available to third parties for a fee, in any form whatsoever, without the express written permission of DCA MultiMedia.

The article is in Dutch

Tags: FrieslandCampina Arla investigate merger News milk

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