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Müller takeover to milk buying clout

By Rick Pendrous, 30-Jan-2012

Related topics: Business News, Dairy

Müller's announcement that it had launched an agreed takeover of Britain's "leading" liquid milk supplier Robert Wiseman Dairies was the biggest surprise of the past month.

The news was certainly not expected by some city analysts, although there had been rumours in the market prior to the announcement. These were associated with movements in Wiseman's share price.

Several analysts were surprised by Müller's decision to move into the UK's highly competitive liquid milk sector. According to analyst Clive Black at Shore Capital, the biggest benefit was likely to derive from the greater liquid milk purchasing clout it would give the German-owned yogurt producer. Otherwise, the reasons for the move are still fairly opaque.

The announcement inevitably led to speculation that Dairy Crest, which has interests in both liquid milk and cheese, would be the next object of desire. Rumours had circulated early last year that Dairy Crest was a potential takeover target, having reportedly been linked with names such as French group Lactalis and Müller itself.

Müller's £279.5M agreed cash bid for Wiseman comes at a time when, according to several informed sources, it had been having a rather torrid time in the UK. While subsidiary Müller Dairy, based in Market Drayton, Shropshire had created a market-leading position for itself in the yogurt and potted desserts market, particularly with its popular Corner yogurts, the arrival of Austrian own-label competitor Nom Dairies on its doorstep at Telford in 2009 had upped the ante considerably. Last October, Nom announced further plans to invest another £100M plus at its Telford plant to expand production over the next few years. This will be overseen by Christoph Wenisch, chief executive of Nom International, following the decision by the UK operation's chief executive David Potts to leave the company last December.

While competition between retailers in the liquid milk market remains stiff, milk suppliers are continuing to invest. Arla is currently developing its 1bn-litre milk facility in Buckinghamshire, which could add around 250Ml of capacity and Dairy Crest is investing £75M over three years in its liquid facilities. Wiseman increased capacity at its new Bridgwater dairy in Somerset to 500Ml a year in November 2010.