The deal, effective on May 1, is a simplified and better option, say the co-ops, than the originally proposed strategic joint ventures. These would have involved both the dairy and agri-business interests of the respective businesses.
Chief executive of Fane Valley Co-operative Trevor Lockhart, said: “Fane Valley and Lakeland Dairies are absolutely convinced that the interests of their respective milk suppliers will be better served in a combined business which can deliver greater economies of scale and enhanced market capability.
He said, in the end, it had become evident that some of the complexities involved in establishing and operating a cross-border JV of this nature were going to detract from the key strategic purpose of the merger and the ability to fully realise all commercial synergies.
“The principal goal of Fane Valley has been to create a dairy business which is better positioned to deliver maximum returns to milk suppliers in the years ahead. Recognising this, the Board has decided to focus its attention on supporting Lakeland to drive forward the expanded dairy business,” said Mr Lockhart.
Fane Valley would continue to develop and invest in its wider agriculture and food related businesses, he said.
Michael Hanley, chief executive of Lakeland Dairies claimed the strategic rationale behind the two businesses co-operating was as strong today as it was in August 2015.
“It is extremely positive that the Boards of both co-operatives have had the foresight to recognise the limitations of the initially proposed Joint Venture arrangements and the courage to adapt and revise their approach,” said Mr Hanley.