Last week’s announcement by Glanbia Ingredients Ireland Limited (GIIL) that it had entered into exclusive discussions with Fivemiletown & Brookeborough Co-operative Agricultural & Dairy Society Limited has caused some speculation within the dairy sector. It seems to have come as a shock to Lakeland, who were believed to be the front runner in negotiations with the small Co Tyrone-based cheese manufacturer.

Lakeland chief executive Michael Hanley has told the Irish Farmers Journal that the “Lakeland offer is still on the table”. It is understood this offer includes the purchase of assets along with the milk pool and that it is keen to add the cheese brands to its portfolio.

It’s understood that the business has been losing substantial money in recent months and various dairy companies have been approached with a view to a deal. A milk pool of around 25 million litres annual supply could be acquired, considerably less than the co-op was processing two years ago. There was also believed to be some interest in some Fivemiletown cheeses brands and the farm supplies business based in the town.

The word being put out by sources within the workforce at the creamery was that Lakeland had offered to keep the business operating but the proposed deal with GIIL would mean more money for the shareholders and closure of the factory almost immediately.

While local politicians in the North were quick to issue statements warning that 50 jobs are at stake if the doors close at the Fivemiletown creamery, the main speculation within the dairy sector is that the move by GIIL could be a warning to Lakeland about its possible role as a customer for milk bought in the far south of the country by Strathroy. It is clear that Strathroy will require customers for milk at times when their newly acquired supplies in the south are surplus to their needs for liquid milk retail customers – milk that they are apparently acquiring from former suppliers of GIIL (see Dealer on page 10).

Industry insiders are also wondering how this may affect the relationships with some southern “dual suppliers” who currently supply both Glanbia and Lakeland. Could the entry of Strathroy into the milk purchasing arena in the south mean an end to previous gentlemen’s agreements between the dairy co-ops?

Meanwhile, before any deal between GIIL and Fivemiletown can be completed, there has to be a vote by Fivemiletown shareholders with a 75% majority in favour and the deal would have to be approved by the board of GIIL. There are 39 shareholders who hold voting rights.

According to the announcement by GIIL last week, the deal would involve the Co Tyrone co-op entering into a long-term milk supply agreement with GIIL and developing an alliance with Glanbia plc’s Agribusiness Division.

GIIL would perform milk collection and testing on behalf of Fivemiletown as well as providing an advisory service to its suppliers. As part of the transaction, GIIL would have an exclusive licence over the retail cheese brands except for Boilie, which will remain with Fivemiletown.