Made-in-Bristol deal shakes up milk industry

December 30, 2013

Bristol-based advisers and funders from law firm Burges Salmon, accountants Deloitte and PwC and banking group HSBC are behind a major dairy industry deal that completed this week.

The deal gives farmer-owned Milk Partnership Limited (MPL) accession to corporate membership of Europe’s leading dairy cooperative Arla Foods amba and means MPL (now renamed Arla Milk Co-operative Limited) will supply more than 1.5bn litres of milk to Arla – equivalent to 14% of the UK’s total milk production.

MPL members will benefit from a European milk price for their milk and also from the profit derived from Arla’s global operations in key markets, meaning they will no longer rely solely on a milk price set purely by the UK market.  UK farmer members of Arla now supply 26% of the total UK milk production to their co-operative.

After the initial exchange of contracts on 27 August 2013, the proposed transaction was communicated to the 1,500 farmer members of MPL. Following a series of meetings throughout the UK and Europe, the deal was approved at farmer meetings in Denmark and the UK and subsequently more than 1,500 new milk supply contracts were entered into. 

The famers who choose to join will receive the same membership rights and status as the existing 12,250 farmer owners of Arla Foods amba including the Arla Milk Link farmers who joined last year through the merger of Milk Link Co-operative and Arla Foods, on which Burges Salmon also advised.

This is the first time that Arla Foods amba has agreed to permit a farmer-owned organisation to become a corporate member without having a dairy business to transfer to Arla Foods.  In this case the cost of membership has been funded by HSBC, the repayment of which is facilitated through a levy on future milk supplies. No financial details have been disclosed.

A multi-disciplinary team from Burges Salmon, led by senior partner Alan Barr, pictured, advised longstanding client MPL on its proposed accession to corporate membership of Arla Foods amba. The Burges Salmon team, which included specialist co-operative, banking and tax lawyers, advised MPL on all aspects of the process and completion of the transaction. They worked closely with a team from Danish law firm Gorrissen Federspiel.

HSBC’s West and Wales Corporate team provided MPL with an innovative finance package to support the transaction. The bank has worked with the Milk Partnership since 1994. Senior corporate banking manager Chris Tasker, who heads HSBC’s agri-food business in the West and Wales, led the deal on behalf of the bank. HSBC was advised by PwC's Bristol office and international law firm Allen and Overy.

Deloitte’s corporate finance advisory team in Bristol, led by Phil Lane, Chris Eastman and Ruairí Ó Dochartaigh, advised MPL with business planning and financial aspects to support the transaction.

Mr Barr said: “This transaction marks a real milestone in the UK dairy industry. Having advised Milk Link in 2012 on its merger with Arla, negotiating the entry to Arla Foods of MPL members, the culmination of strategy for which MPL was created nearly ten years ago, has felt like finishing the job.  The UK dairy industry's major dairy processor is now owned by 2,500 supplying dairy farmers.  It has been a privilege to be part of making this change in the industry for the benefit of UK farmers.”

Mr Tasker added: “This transaction not only shows HSBC’s support for the Milk Partnership and its management team, but also the wider farming community where the deal supports approximately 1,500 dairy farmers, who become part-owners of a leading global dairy business.  HSBC has a strong appetite to support the agri-food sector, as evidenced by the innovative structure of this finance package.”

Burges Salmon has significant strength and depth of experience in both specialist co-operative law and in the food & farming sector. 


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