The board of Arrabawn co-op has rejected Dairygold co-op’s recent approach regarding a possible merger.

In a statement to the Irish Farmers Journal, Arrabawn chairman Sean Monahan said: “In order to put an end to a lot of speculation, the board of Arrabawn has confirmed to Dairygold that they are not interested in discussing any merger proposals with them or any other co-op.”

Dairygold made a written proposal to Arrabawn in May. It proposed converting Arrabawn shares into Dairygold shares using a value of €2 per Arrabawn co-op share and offered full farmer representation in the enlarged co-op’s structure. It also suggested significant upside for producers on milk price.

An Arrabawn spokesman yesterday confirmed that the matter was discussed at a meeting of their board last week. However, it is not clear if the board discussed the approach prior to August 30, when Dairygold’s interest in Arrabawn was exclusively revealed by the Irish Farmers Journal.

Ironically, Arrabawn’s rejection of the merger approach appears to have come on the same day (Thursday) that Minister for Agriculture Simon Coveney delivered his strongest comments yet on the need for dairy rationalisation.

Speaking at a Bord Bia event in Dublin, he told the food industry: “We haven’t done what is needed. I am not suggesting we need a Fonterra. But do we need to have the (current) number of co-ops? I don’t think that we do. It means decisions and decisions are hard taken”.

He added that “historical pride” may be “holding us back”, noting that “there is intense competition in global markets in sports nutrition, infant formula or Ingredients and flavours. In scale there are big players and in an international context we are small. And if Ireland doubles our dairy sector, we will still be small”.

Meanwhile it has emerged that the total volume of milk held by disaffected Arrabawn suppliers is now 43m litres. None of these suppliers have given three months’ notice to transfer. While Glanbia is reported to be meeting the suppliers and would be likely to accept transfers, it is not clear what the approach of their first preference – Dairygold - will be.

While closing the door to mergers, Sean Monahan’s statement was open to other colloboration: “should Dairygold, or any other co-op, wish to discuss ways and means of improving efficiencies that will deliver a better return to milk suppliers then Arrabawn will be very happy to consider them. An example of such co-operation is the arrangement between Arrabawn and Dairygold whereby Arrabawn processes the Dairygold milk in December and Dairygold processes the Arrabawn milk in January and February. This arrangement has been in place for the last two years and will continue again this winter”.