Glanbia, formed last year from the merger of Avonmore Foods and Waterford Foods, has five dairies in Durham, Hyde near Manchester, Salisbury and two in Birmingham. All are expected to close with the exception of the Durham plant. The rationalisation will cost Express around pounds 20m and yield an estimated pounds 15m a year in cost savings.
The deal takes Express' share of the UK milk market from 21 per cent to 30 per cent and strengthens its position as the market leader ahead of Unigate and MD Foods. It is understood Express Dairies sought confidential guidance from the Office of Fair Trading that the deal is not expected to run into regulatory problems.
With other recent deals in the sector the OFT has taken the view that large market shares are an acceptable trade-off for protecting the market for doortep milk deliveries, which is contracting at the rate of 8 per cent a year. Analysts predict further deals, with the market eventually reducing to just three of four suppliers. "You have to look at companies like MD foods, Robert Wiseman and Dairy Crest as the next in line," one said. Unigate is not thought to want to increase its liquid milk interests.
Glanbia, the UK's fifth largest liquid milk processor, has seen its milk production volumes fall recently after losing two major customers - supermarket giants Safeway and Asda. The problems have caused a sharp fall in the company's share price which has collapsed from 300p to 105p in the last year.
News of the deal came as Express, which de-merged from Northern Foods last year, reported a 9 per cent rise in full year profits to pounds 60.2m. This summer the company is planning a trial in Humberside under which customers will be able to order bulky goods like pet food and cereals by 10pm and have them delivered with their milk the next morning.
Express has been issuing its milkmen with handheld computers to help them log purchases and build up a database of customer orders.