Arla-Campina, Milk merger ends in splash

Arla Foods, Europe's largest dairy company, announced today that the merger with Dutch dairy giant Campina has been called off

21/4/2005 - Arla Foods, Europe's largest dairy company, announced today that the merger with Dutch dairy giant Campina has been called off. In a statement, Arla said that the two companies had: "failed to reach a common solution and therefore the two boards have decided to end the merger work. "In a statement Arla said it could not give further details because of contractual reasons in connection with merger plans."

The failure of the ballyhooed merger plan between Campina of the Netherlands and Arla of Denmark comes as a real blow to members who already felt the deal was a fait accompli. Both companies have issued curt statements citing confidentiality agreements which prevent them from talking about the merger talks collapsing. 

In a separate statement, Justinus Sanders, Campina's CEO said "Campina has enough opportunities and strength to continue its successful course of international growth, innovation and efficiency." He went on to say that Campina "is a very healthy and solid company," Sanders added.

The merged company would it was felt have provided the kind of marketing and research budgets to combat other dairy giants like Danone and Nestle. But now the talks lay in tatters. The CEO of Arla  Mr Ake Modig announced his resignation. He has been with Arla for thirty years. He resigned following the talks failure which makes the end of the discussion even more definitive.

Talks between the northern European dairies have produced little fruit in recent years. Frieland-Coberco, itself engrossed in rationalisation following its creation, has rebuffed overtures from Campina and Arla. Other mergers would not give the critical mass and savings on manufacturing that would stem from the combination of two of these three. The Finns with their Valio are not such an ideal partner with their small sized dairy farmer members and their commitment to social issues. Nordmilch has member interests more at heart and with its smaller size and merger would could mean losing control to a cooperative in another country and that is the stumbling block for them.

Culture and milk quota , issues central to the competitiveness and prosperity of dairy farmers were always an issue but seemed to be a scalable hurdle. The  Danes and Arla  have a more aggressive posture on super-sizing their cooperative farm members which are a little less palatable in the south of the Netherlands. However it was felt the farmers had already been won over. Duch farmers in April sought a bigger role in the merger discussions. 

So the attention will turn to possible arguments over management control, the rationalisation that would have to be undertaken or the actual financial stake that would accrue to members of the merging cooperatives. The latter point was detailed in general terms at the beginning of the discussions after the companies had looked over each others operations in a more general way. At the announcement of the merger both partners felt they understood the working of the others business in significant detail. Despite the thorough groundwork the talks are now over for the foreseeable future.