No financial details of the transaction were revealed, but the deal will take place following merger approval by the UK Competition and Markets Authority.
The transaction would give the farmer-owned dairy cooperative the rights to use the Yeo Valley brand in milk, butter, spreads and cheese under an intellectual property licence.
The Yeo Valley yogurt, ice cream, cream and desserts business would continue to be run independently through Yeo Valley Group, which remains under the ownership of the Mead family.
Arla Foods said the deal would allow it to focus on encouraging consumers to trade up to organic products. It added that, to meet this growing demand, there would be investment in innovation and ranges under both the Yeo Valley and Arla brands.
Tomas Pietrangeli, md at Arla Foods, said: “Arla Organic Free Range milk has driven 60% of all the growth within the organic milk category in the last 12 months, with 70% of all Arla Organic Free Range milk sales attributable to customers who would not have purchased organic milk previously. Through the licence to use the Yeo Valley brand, we believe we can further drive organic penetration of the milk market.”
Tim Mead, who is an organic farmer and custodian at Yeo Valley, said: “Arla’s farmer-owned credentials are aligned to the values and ethos on which the Yeo Valley brand is based – supporting British family farms. We have a long-held ambition to grow organic dairy in the UK, because at Yeo Valley, we believe that organic dairy is better for the planet, for the cows and for health.”
Arla Foods is a global dairy company and co-operative owned by 11,200 dairy farmers, around 2,500 of whom are British.