LacPatrick Dairies intends to hold a vote with shareholders on its potential merger with Lakeland Dairies this coming September.

Last week, the boards of both co-ops agreed to enter into “exclusive discussions” regarding an amalgamation of the two societies.

Both co-ops stated that: “any agreement reached will be subject to shareholder approval and the relevant regulatory clearance”.

Last April, LacPatrick Dairies announced it was “pursuing a number of strategic options” for its future.

Glanbia, Lakelands, Aurivo, Dale Farm and a Japan-based company each expressed an interest in acquiring LacPatrick’s 600 million litre milk pool.

Although questions ensued about LacPatrick’s financial viability – particularly in light of milk price cuts in the months running up to the announcement – Lakeland Dairies was hotly tipped as a key front-runner in the race.

So what would an amalgamation of the two entities entail?

LacPatrick Dairies – formed in 2015 following the mergers of Town of Monaghan Co-op and Ballyrashane Co-op – collects and processes 600 million litres of milk across Ulster from 1,000 farmer suppliers – with a range of its dairy products exported to all continents.

Meanwhile, Lakeland Dairies – a farmer-owned dairy processing co-operative with operations across 15 counties on a cross border basis – collects and processes over 1.2 billion litres of locally-produced milk each year into a wide range of value-added dairy foodservice and food ingredient products – which it also exports worldwide.

National scale

A merger would mean a coming together of milk pools, services, drying facilities, processing facilities, and it would inevitably give the co-ops a stronger position in the increasingly likely event of a hard border between Northern Ireland and the Republic post-Brexit.

Should the merger go through, the co-ops’ combined milk pool of 1.8 billion litres would easily position them as the second biggest in the country – next to Glanbia.

From a LacPatrick point of view, the merger would satisfy a number of things – it would give assurances and stability and sort out the co-op’s debt position. In 2015, the co-op invested €40 million in a state-of-the-art dryer at its Artigarvan facility in Co. Tyrone.

In addition to scale and a share in the new company; it would also most likely give LacPatrick increased Northern Ireland representation on a combined board.

Although it is understood that both sides have broadly agreed heads of terms, it is expected to take four or six weeks to work out all the details ahead of a shareholder general meeting (SGM).

A spokesperson for LacPatrick Dairies said: “We’re expecting to go to shareholders with information meetings and a vote in September.”