Responding to reports in the British press over the weekend, Robert Wiseman Dairies today confirmed that it has begun negotiations with First Milk over the sale of a 15 per cent stake in the company, hinting that the deal would most likely be concluded via a tender off to all Wiseman shareholders at a price of £2.50 per share, a premium of 10 per cent on Friday's closing price.
While any Wiseman shareholder could sell their shares as part of the First Milk deal, the likelihood is that the company's chairman and managing director, the brothers Alan and Robert Wiseman respectively, would use the opportunity to effectively reduce their 55 per cent holding in the company.
But this will not mean any change of direction for the company. Alan Wiseman said in a statement today that the deal would "strengthen the relationship that exists between the two organisations", but there would "be no change in the management of the company with the respective roles of myself and Robert remaining the same".
The relationship between Britain's dairy processors and the farmers that supply them with milk has been a rocky one for many years, with the processors under increasing pressure from their main clients, the multiple grocers, to cut costs and, inevitably, passing these demands back down the line to farmers.
A link-up with First Milk - which has 4,000 dairy farmer members and processes 2.6 billion litres of milk annually - should give Wiseman access to larger volumes of milk, important if it is to carve a niche for itself in the increasingly competitive dairy market.
With margins on supermarket own label milk pared back to next to nothing, processors such as Wiseman are increasingly looking to alternative sources to boost profits. Wiseman recently launched a new 1 per cent milk called The One in a bid to add some value to its liquid milk portfolio, and a successful nationwide rollout of the brand would certainly require additional milk supplies.