The joint venture company, located at Westbury, Wiltshire, operates a skimmed milk powder and bulk butter production facility. First Milk has shared access of the site in various joint ventures for over 12 years and Arla became a partner in the joint venture in September 2010 and purchased the freehold of the site in December 2013.
First Milk chiefs said the move was a further step in reshaping its business under the leadership of chief executive Mike Gallacher. The agreement will enable First Milk to continue to have access to the powder drying capacity at the Westbury site during peak milk production and at other pre-defined times of the year.
Huge exposure to commodity dairy prices through Westbury has been something First Milk has struggled with in recent years as they wider market fell.
Back in January 2015, First Milk announced it was deferring farmers milk cheques as a huge financial crisis was revealed at the co-operative. The turmoil at First Milk led to the departure of former chief executive Kate Allum, who has was replaced by Mr Gallacher in March.
Mr Gallacher said: “I am delighted to announce this significant step in the reshaping of First Milk around our core cheese and liquid business. This follows recent announcements of our return to trading profit, the establishment of a new board and governance structure, and the sale in December of the Glenfield Dairy subsidiary.
“While the dairy industry remains exceptionally tough, the progress we have made over the last nine months gives us the platform to focus this year on improving the relative returns to our members.
“We have worked very closely with Arla to reach this agreement and continue to see this as an important trading relationship for First Milk.”
Taking full ownership of the joint venture is a strategic move for Arla and a 'natural step to providing the business with an opportunity to optimise its manufacturing footprint in the UK', it said.
Peter Giørtz-Carlsen, executive vice president of Arla Foods UK, said: “We are pleased to have come to this agreement. Arla has just launched Strategy 2020 in which we aim to grow our business in eight global dairy categories and six market regions around the world.
"The Westbury site is now an integral part of that global network of Arla production sites and will benefit from being so, further helping the UK to play an even more significant role in our global strategy.”