Burges Salmon and multinational banking and financial services company HSBC, have assisted Milk Partnership Limited (MPL) with its accession to corporate membership of Europe’s leading dairy cooperative Arla Foods amba. The transaction completed on Monday 30 December 2013.
MPL (now renamed Arla Milk Co-operative Limited) will supply in excess of 1.5 billion litres of milk (14 per cent of the UK's total milk production) to Arla Foods amba. MPL's members will benefit from a European milk price for their milk and also from the profit derived from Arla Foods amba's global operations in key markets and will no longer be solely reliant on a milk price set purely by the UK market. UK farmer members of Arla now supply 26 per cent of the total UK milk production to their co-operative.
After the initial exchange of contracts on 27 August 2013, the proposed transaction was communicated to the 1,500 farmer members of MPL. Following a series of meetings throughout the UK and Europe, the deal was approved at farmer meetings in Denmark and the UK and subsequently over 1,500 new milk supply contracts were entered into. The farmers who choose to join will receive the same membership rights and status as the existing 12,250 farmer owners of Arla Foods amba including the Arla Milk Link farmers who joined last year through the merger of Milk Link Co-operative and Arla Foods, on which Burges Salmon also advised.
This is the first time that Arla Foods amba has agreed to permit a farmer owned organisation to become a corporate member without having a dairy business to transfer to Arla Foods. In this case, the cost of membership has been funded by HSBC, the repayment of which is facilitated through a levy on future milk supplies.
A multi-disciplinary team from Burges Salmon, led by the firm’s senior partner Alan Barr, advised longstanding client MPL on its proposed accession to corporate membership of Arla Foods amba. The Burges Salmon team, which comprised specialist co-operative, banking and tax lawyers, advised MPL on all aspects of the process and completion of the transaction and worked closely with a team from Danish Law Firm Gorrissen Federspiel led by Michael Meyer.
HSBC’s West and Wales Corporate team provided Milk Partnership with an innovative finance package to support the transaction. HSBC has worked with the Milk Partnership since 1994 and this latest deal further cements the company’s relationship with the bank. The deal was led on behalf of the bank by Chris Tasker, senior corporate banking manager, who is responsible for leading HSBC’s agri-food business in the West and Wales regions. HSBC was advised by PwC’s Bristol office and Allen and Overy.
The Corporate Finance Advisory team at Deloitte in Bristol led by Phil Lane, Chris Eastman and Ruairí Ó Dochartaigh advised MPL with business planning and financial aspects to support the transaction.
Alan Barr, who led the Burges Salmon team, said: 'This transaction marks a real milestone in the UK dairy industry. Having advised Milk Link in 2012 on its merger with Arla, negotiating the entry to Arla Foods of MPL members, the culmination of strategy for which MPL was created nearly ten years ago, has felt like finishing the job. The UK dairy industry's major dairy processor is now owned by 2,500 supplying dairy farmers. It has been a privilege to be part of making this change in the industry for the benefit of UK farmers.'
HSBC senior corporate banking manager Chris Tasker said: 'This transaction not only shows HSBC’s support for the Milk Partnership and its management team, but also the wider farming community where the deal supports approximately 1,500 dairy farmers, who become part-owners of a leading global dairy business. HSBC has a strong appetite to support the agri-food sector, as evidenced by the innovative structure of this finance package.'
Burges Salmon has significant strength and depth of experience in both specialist co-operative law and in the food and farming sector. From a commercial perspective, Chambers describes the team as being 'commercially very astute lawyers' with the firm also receiving comments such as 'a very impressive firm in terms of technical expertise' in this sector.