Dairy Crest is selling its dairies operations, valued at £80 milliion, to Müller UK & Ireland Group.

Dairy Crest says that the disposal of its operations is in the best interest for customers, consumers, employees, dairy farmers and Dairy Crest shareholders:

“It will create a stronger business that protects long term employment and has the potential to help reduce costs and increase efficiency.”

The sale is expected to take several months, after which Dairy Crest will refocus on profitable operations in branded cheese and spreads, such as Cathedral Cheddar and Countrylife butter.

Dairy Crest’s spreads factory in Kirkby employs slightly fewer than 200 staff.

This follows Dairy Crest’s announcements of loss-reducing restructuring in 2012, including dairy plant closures in Aintree (resulting in the loss of 220 jobs).

Dairy Crest has announced that it will use proceeds from the sale to reduce its net debt.

Dairy Crest Chief Executive Mark Allen said:

“Dairy Crest is very proud of the dairy business it has built and we are delighted that it will be combined with Müller Wiseman Dairies’ equally well-established operation.

“This proposed sale is a great opportunity for our two companies, our farmers, our staff, our customers and consumers.

“Completing this transaction would be a positive development for Dairy Crest and for the UK dairy industry.

The combination of our dairies operations with those of Müller Wiseman Dairies will create efficiencies and economies of scale that will help to create a more sustainable UK dairy sector that is better placed to compete on the global stage.”

He added:

“The disposal will allow Dairy Crest to focus on continuing to grow our successful and innovative branded cheese and spreads operations. We will also deliver additional added value sales through our whey investment.

“We are confident that this focus will deliver further medium term profit growth for our shareholders.”

An analyst with Liverpool stockbroker Shore Capital, Darren Shirley, described the sale as “surprising” and “positive” news:

“The consideration for the Diaries is £80m payable in cash, whilst Dairy Crest will also retain full ownership of previously closed dairies at Totnes and Fenstanton, the Chard site and also a number of already closed diaries which we expect to realise a further £20m on disposal.

“We also expect Dairy Crest to benefit from around £15m of tax benefits from the deal, taking the total value to about £115m; we see this as an excellent deal for Dairy Crest and believe credit should go to Mark Allen and his team in engineering this event.”

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Words: Peter Cribley