Ysco-earnings of Milcobel ease merger with FrieslandCampina

Just a few months to go and then the top executives of FrieslandCampina and Milcobel can breathe a sigh of relief. Very likely then, because on December 16, the members will vote on the merger, which was already proposed in January. At that time, the main points were announced, and recently a detailed merger proposal was published, with an attachment containing the entire plan of almost 150 pages, including new details. Although it is called a merger proposal, the entire document breathes a takeover of Milcobel by FrieslandCampina, which also seems to be the most practical solution. FrieslandCampina is 10 times larger and also the financially stronger and healthier party. With the inclusion of Milcobel, the board of FrieslandCampina will be expanded from 7 to 8 seats. This extra seat does not directly represent the 2 new Milcobel districts, but is indeed delegated from the old Milcobel. Assets and valuation Milcobel is undeniably the weaker party. According to the annual report for 2024, it has a net asset of €131 million (27%). FrieslandCampina has a net asset of 39%. Also, the business results of Milcobel are significantly lower. Nevertheless, the Milcobel members do not seem to be held accountable for this. FrieslandCampina, as the acquiring party, is the more generous one. In the merger proposal, Milcobel is also valued higher than the sum of its net assets, as it is valued at €222 million. That's €91 million more based on the net asset and could raise Milcobel's net asset to 45%. Ysco adds value According to a statement from both parties, the higher valuation is due to additional revenues generated from the sale of Ysco and from accounting revaluations. The sale proceeds of Ysco have not been officially disclosed, but according to some sources brought in €200 million. Much less is left as net income, as Milcobel used part of it to repay debts and distribute to loyal members. New structure Despite the difference in value and assets of both merging parties, the intended merger is not expected to affect the distributable reserves of FrieslandCampina, it is reported, but the implementation of a joint cooperative membership structure could change that, it states in a footnote. For the rest, the merger document does not seem to change much at least for the existing members of FrieslandCampina. At the corporate level, Milcobel will likely become a subsidiary of FrieslandCampina (the company) and thus be incorporated into the country structure. For the members of Milcobel (and also FrieslandCampina), the merger also means they can exercise their right to withdraw, if they wish. That is simply a legal right in all mergers and amendments to the statutes of cooperatives. The risk of withdrawal may now be limited, as at least the Milcobel members can expect to benefit significantly from the merger. FrieslandCampina pays a clearly higher milk price. FrieslandCampina's ambitions The merger document also indicates a slight risk for that milk price, but a risk known to the members of FrieslandCampina. Should the leadership of FrieslandCampina decide to make a large acquisition and allocate more than €500 million for it, this could be charged to the members and deducted from the milk payments. However, FrieslandCampina assures that such a thing will not happen lightly. And when it does, the board must always give approval. It is clear that FrieslandCampina's ambitions are not satisfied with the merger or takeover of Milcobel. In the member magazine of September, chairman Sybren Attema states that FrieslandCampina continues to look for other growth opportunities. According to Australian media, the company was also in the running earlier this year to take over Fonterra's Australian operations, but there Lactalis walked away with the spoils. According to the merger proposal, FrieslandCampina and Milcobel have until the end of 2026 at the latest to finalize their merger. That deadline seems achievable, provided the competition authorities do not do anything unexpected.