Dairy Crest, whose market debut was prevented two years ago by the upheaval in the milk market following deregulation, is expected to be valued at between pounds 200m and pounds 250m following the listing of the company in August.
Sir Derek Andrews, chairman of the Residuary Milk Marketing Board, which now owns Dairy Crest on behalf of dairy farmers, revealed that they had been approached over the past few months about a trade sale for all or part of the group.
Although these approaches never got to the stage of discussing a price, they were rejected in favour of a flotation. "Although other methods of disposal were not excluded, there was a clear presumption in the legislation in favour of floating Dairy Crest," he said.
One of Dairy Crest's main considerations was that a majority of producers, and certainly the National Farmers' Union, had expressed a preference in favour of setting up Dairy Crest as an independent third force alongside existing dairy companies, Sir Derek added.
Dairy Crest will rank behind Northern Foods, owner of Express Dairies, and roughly equal with Unigate in the dairy food sector. A proportion of shares, expected to be between 25 and 30 per cent, will be placed with City institutions, raising the pounds 66m necessary to repay debts to so-called rolling fund producers who had part of the proceeds of milk sales in the 1993/94 financial year withheld by the old MMB.
Around 28,000 rolling fund producers who are also so-called eligible producers, those registered under the milk marketing scheme in 1992/93, will benefit from the sale, plus a further 1,400 farmers who fall into one category or the other.
Dairy Crest has been transformed over the past six years, with the sale or closure of many of its creameries and doorstep delivery depots as it concentrated on higher added value areas such as spreads, yoghurts and mature cheddar.
Profits have fluctuated under the impact of massive restructuring provisions, the loss of parts of the business and pressure on margins as a result of deregulation.
Yesterday it reported a 69 per cent rise in the pre-tax total to pounds 37.4m for the year to March.
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