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Express Dairies agrees all-share merger with rival Arla Foods

Liz Vaughan-Adams
Friday 28 March 2003 01:00 GMT
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The milk supplier Express Dairies outlined an agreed merger with the UK unit of Arla Foods yesterday in an effort to cut costs in the face of chronic oversupply in the market.

The tie-up will boost the company's share of the UK supermarket milk market to about 43 per cent and cut the number of suppliers to three. There will almost certainly be job losses in the combined 9,000 strong workforce although it was unclear last night how severe the cuts would be.

Jens Bigum, the managing director of Arla Foods amba, said: "In the UK dairy industry we support the view that further rationalisation is needed in order to meet a challenging future and preferably with dairy farmers and processors getting closer. A combination of Express Dairies and Arla Foods represents a very strong response to the challenges ahead."

The deal, in effect, a reverse takeover, lifted stock in the pair's rivals with Dairy Crest closing up 5.1 per cent and Robert Wiseman finishing 2.3 per cent higher. Trading in shares in Express Dairies was suspended yesterday but is expected to resume on Monday.

Express will issue 311 million shares, giving Arla a 51 per cent share of the combined business which will be renamed Arla Foods UK. Express share-holders will get a special dividend of 9.6p.

Arla Foods plc is the UK unit of Arla Foods amba, a co-operative owned by Swedish and Danish milk producers.

Express said the deal, which needs regulatory and shareholder approval, was expected to enhance earnings by the end of the first full year after completion. It is expected to deliver cost savings of more than £20m a year in three years' time.

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