Under the terms of the deal, Hansa-Milch will become Hansa Arla Milch. Originally mooted at the end of December, the merger aims give the two parties greater bargaining power with supermarkets in Germany.
“Together, we can offer a full range of dairy products from a single provider, making us an even more attractive partner for German retailers,” said Ove Møberg, chairman of the Supervisory Board at Arla Foods.
Arla Foods is currently known in Germany for its specialty cheeses such as Arla Buko, Castello and Arla Höhlenkäse and the butters Arla Kærgården and Lurpak. The merger will enable Arla to add fresh dairy products to this portfolio.
Joining up with Hansa-Milch, which is a German co-op based in the north of the country with around 1000 members and 400 employees, will also significantly increase its presence in Germany.
German growth plans
Arla currently has a turnover in Germany of around DKK 2bn and Hans-Milch has a similar turnover. Following the merger, Arla said it will be ranked around sixth place by turnover in the list of biggest dairy companies in Germany.
Peder Tuborgh, CEO at Arla Foods, said his aim is that together with Hansa Arla Milch, Arla becomes one of the top three German dairy companies.
Arla spokesperson Theis Brøgger said: “This merger is one of the first important steps toward that position. More organic growth and possibly cooperation with other new partners in Germany will be the way forward to achieve this goal.”
The merger is subject to approval from the EU competition authorities. Brøgger said once approval has been obtained, Arla will speak more specifically about its German growth plans.
Tuborgh said growth in Germany is important if Arla is going to deliver on its goal of offering a higher milk price to Hansa Arla Milch farmers.
“In previous years, the price we paid for milk was generally higher than that given by Hansa-Milch. This means that Hansa Arla Milch members can expect a higher price in future. To achieve this objective, we need to continue to grow in Europe, and particularly in the important German market.”