ESTONIA – United Estover Group, one of Estonia’s largest dairy producers, has acquired the Saaremaa Dairy to boost the group’s output and competitive ability in Estonia and internationally.

The transaction needs the green light from the Saaremaa Milk Cooperative and the Competition Authority to go ahead, SEB bank that is funding the transaction said.

Tõnu Post, chairman of the council of the Saaremaa Piimaühistu, which owns the dairy industry and whose members include almost all local milk producers, said that Saareans producers expect, above all, that the purchase price of milk will rise to the same level as on the mainland.

Dairy industries on the mainland currently pay up to £520 (US$515.06) per ton for raw milk, while Saaremaa’s industry pays £475(US$470.4) per ton, which is why local producers could eventually start selling their milk to the mainland.

With this shift of local producers to transact with the Mainland, would have probably meant the end of the Saaremaa Dairy Industry, which has been losing money in recent years.

The increase in the cost of production inputs also made Saaremaa Dairy’s production difficult, especially energy which has become more expensive many times over, and it has not been possible to transfer everything to the selling price, Post stated.

The Saaremaa Dairy (Saaremaa Piimatööstus) buys milk on the western Estonian islands of Saaremaa and Hiiumaa and turns it into cheese, butter, and other dairy products.

Post confirmed that the sale transaction is certainly not one where the larger one swallows up the smaller one, but through the merger of two fairly equal companies, both their market power and efficiency will increase.

Ago Teder, a member of the board at Estover, said the cooperation agreement allows the two businesses to get the purchase and sale process going, which will, in turn, help the only two remaining cheesemakers based 100 percent on Estonian capital to move toward their goals.

Teder affirmed that all existing products of the Saaremaa Dairy Industry will remain even after the purchase-sale transaction.

At the same time, Ahti Viilup, who managed Saaremaa’s dairy industry for decades and is now retired, told Saarte Hääle that he does not support the sale of the industry to continental farmers, because then Saaremaa’s farmers will lose the last right to say about it.

He noted that the industry’s return to manufacturing city milk products may not have been a good decision as it made the company’s debt burden very high.

Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE.