Bosses welcome £80m Muller dairy deal as 'exciting opportunity' for industry

Competition authorities have now removed their objections to the deal, after accepting a proposal from Muller to produce 100 million litres of milk a year for Medina Dairy in the south west.

Dairy Crest's dairies operation will now be absorbed into Muller on Boxing Day, and bosses said the change would benefit the dairy sector in the UK.

"There is no question that further consolidation is required in the UK fresh milk sector and with this hurdle now cleared, we have an exciting opportunity to create a more competitive, sustainable, efficient and innovative dairy processor in the UK," said Muller chief executive Ronald Kers.

Dairy Crest chief executive Mark Allen added: "This is a transformational moment for Dairy Crest and the wider dairy industry. The deal will help to create a more sustainable UK dairy sector.

"It will deliver economies of scale and cost efficiencies that will underpin investment in the sector and help the UK to compete more successfully in global markets."

But Shropshire's farmers have given the agreement a more cautious welcome.

Robert Newbury, regional director of the NFU, whose position covers Shropshire, said: "What farmers want to see from this merger is a business capable of paying a more sustainable milk price. The CMA may have approved the deal but as far as farmers are concerned the jury is still out."

Sheldon Mills, the CMA's senior director of mergers and decision-maker in the case, said: "This results in the accelerated entry of a competitor, Medina Dairy, which has the necessary financial backing, commitment and capability to succeed in serving large national retailers. We found widespread backing in the industry for this solution.

"Resolving this merger investigation now brings real benefits to the dairy industry, including farmers, as it provides certainty and allows the businesses involved and their customers to focus on bringing British dairy products to consumers at a competitive price."

Muller has also withdrawn its right not to complete the purchase should there be a deterioration of more than £20 million from the agreed level of profitability of the dairies operation, while Dairy Crest has agreed to a £15 million one-off payment to help meet the cost of the modified proposals.

Environment Secretary Elizabeth Truss said: "This sale of Dairy Crest's Dairies operations to Müller will provide greater stability for our milk industry and the hard-working farmers who supply it."

"It will also allow Dairy Crest to focus on growth in its cheese and spreads business in the UK, and innovative new products for export to high-growth markets.

"Dairy farmers are a vital part of our £100 billion food and farming industry and today's decision is welcome news.

"This deal will encourage further investment in the sector which will in turn enable the UK to compete more effectively internationally."

The deal includes Dairy Crest's dairy facilities at Severnside, Chadwell Heath, Foston and Hanworth together with around 70 depots.

Mr Allen said the move would allow Dairy Crest to focus on growth in its branded cheese and spreads operations and new revenue streams from manufacturing products for the baby formula market.