Fane Valley and Lakeland Dairies have announced this Tuesday that they have reached final agreement on a deal structure which will see Lakeland acquire the Fane Valley Dairies business based at Banbridge, Co Down, effective from 1 May 2016.

"This simplified deal structure is considered to be a better option than the originally proposed strategic joint ventures, announced previously in August 2015, which would have involved both the dairy and agri-business interests of the respective businesses," a statement issued by the two co-ops said.

Last August, Lakeland and Fane Valley had unveiled plans to create two joint ventures - one managed by Lakeland to merge the two co-ops' dairy business, and another one managed by Fane Valley to bring together their agribusiness (feed and stores) operations.

The complexities involved in establishing and operating a cross-border joint venture of this nature were going to detract from the key strategic purpose of the merger

"The option to deliver this through a joint venture model has been the subject of an in-depth assessment by both co-operatives working closely together for eight months," said Fane Valley's Trevor Lockhart. "In the end, it was evident that some of the complexities involved in establishing and operating a cross-border joint venture of this nature were going to detract from the key strategic purpose of the merger and the ability to fully realise all commercial synergies."

Lakeland chief executive Michael Hanley added: "It is extremely positive that the boards of both co-operatives have had the foresight to recognise the limitations of the initially proposed joint venture arrangements and the courage to adapt and revise their approach."

Lakeland breaking the 1bn-litre mark

The acquisition of Fane Valley's Northern Ireland-based dairy business for an undisclosed amount will bring about 250m litres of milk to Lakeland, adding to its existing 900m-litre pool.

Lakeland will then collect 1.1bn litres, half from Northern Ireland and half from the Republic, making it the third largest milk processor in the country after GIanbia and Dairygold, who are just marginally ahead.

Fane Valley's other businesses were not affected by the original joint venture plans and remain outside the perimeter of the new deal. This includes Fane Valley's stakes in Linden Foods and joint ventures in Slaney Meats and Irish Country Meats, which are connected with a separate proposed merger with ABP.

Read a full analysis of the deal in this week's Irish Farmers Journal

Eoin Lowry contributed reporting for this story