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May 23rd, 2012

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The Danish-Swedish dairy cooperative Arla Foods announced in a statement that it is planning two mergers. If approved, Arla plans to engulf Milch-Union Hocheifel, Germany's eighth-largest dairy, and Milk Link, the fourth-largest dairy in Britain. The mergers would increase Arla's annual revenue by nine billion kroner.

“Each of these three companies seek to create value for shareholders in the form of strong milk prices,” Peder Tuborgh, Arla’s chief executive, said in a statement. “If these plans are realised, our futures and ability to deliver results will be strengthened.”

The mergers would make Arla the UK's largest dairy company and the third largest in Germany. The amount of milk handled by the company will increase from nine to 12 billion kilos.

“The strength and value of a co-operative dairy becoming one of the world’s leading dairy companies can not be underestimated,” said Arla chairman Åke Hantoft.

Arla and its acquisition targets are co-operatives, so any mergers must be approved by shareholders at all three companies. A vote on the mergers is expected to take place on June 26.

Arla's 150 board members from Sweden, Denmark and Germany were informed about the merger plans on Monday.

“I dare not predict how the shareholders will vote,” Hantoft told the Swedish news agency TT. “I respect the democratic process. It's not only up to us to decide, the other companies must agree.”

Hantoft said that since the other companies involved will essentially be swallowed up by Arla, getting shareholders to agree may take a bit of work.

If the companies manage to convince shareholders that the mergers should go through, the deal would still need regulatory approval.

If the mergers happen, Arla will gain its first co-op members in Britain, Belgium and Luxembourg. The company’s German holdings will also be significantly expanded.

Arla currently has 8,024 shareholders. That figure would increase to about 12,000 after the mergers.