Through the deal, which has been in development since July last year, the company says it will split its current full ownership of the British group 50 - 50 with Arla UK's own investment company, Milk Partnership Ltd (MPL).
Euro cooperation An estimated 11,000 Danish, Swedish and British dairy farmers will now be joining forces under the new structure, with the undisclosed financial cost being used to fund further investment in the venture's UK processing capabilities, the group said.
Peter Lauritzen, chief executive officer of Arla Foods UK, said that its parent company's experience as one of Europe's leading cooperative dairy cooperatives would ensure UK dairy farmers would have more say in its operations through the deal.
"The joint venture underlines Arla Foods' commitment to come together with UK farmers so they have an opportunity to input into Arla UK's strategy and share in the success of the business," he stated.
The board for the new venture will also be split equally between MPL and Arla Foods, with meetings being used to address both UK strategy as well as common interest issues across Arla's entire operations.
Arla, which has made a number of changes to its operations to deal with higher input costs from raw materials, said it had opened a process that it hoped would allow MPL to acquire part ownership of its UK business back in July.
MPL had initially held a 5.29 per cent share in Arla Foods UK before it was wholly acquired it parent company back in April.
Reorganisation
The agreement marks the latest in a number of recent moves by Arla Foods to ensure greater profitability in its operations by reorganising them.
In October last year, the group announced that it was offloading of its Delimo import arm to France-based Lactalis in a profitability push.
The move reflects the growing pressure on dairy processors to restructure their operations to remain competitive amidst increasing raw material costs.
In September, Arla said it was cutting cheese production by 6,200 tonnes until the new year in a drive to better deal with a dwindling global supply of raw milk.
The group announced that production of edam, danbo, fontal, havarti and rind less cheese were all to be reduced as a result.