Donegal Creameries have finally agreed a deal to sell their dairy division.
The iconic Donegal company had been locked in talks with Connacht Gold for the sale of its dairy business for the past three months.
Advanced negotiations broke down just three weeks ago and it looked like the deal had turned sour.
However Donegaldaily.com understands the sale was finally agreed on Saturday evening.
Connacht Gold will pay €13.5m in cash for the businesses, with further payments of up to €7.4m dependent on the performance of the milk business this year.
The co-op said the deal involved Donegal Creameries’ 120 million litres milk pool, a liquid milk processing facility at Killygordon and 11 retail stores – nine in Donegal and two in Northern Ireland. The stores mainly sell fertiliser, feeds and other products to farmers.
Donegal Creameries’ dairy division, which accounted for 46 per cent of the company’s turnover last year, has been struggling in recent times.
Results for the company for the first six months of this year have show that Donegal Creameries made a loss of €970,000 compared to a profit of €350,000 for the same period last year.
Donegal Creameries’ agri-inputs and seed potato business saw a strong improvement in profits during the same period.
The company owns a number of agri-stores around Donegal including Letterkenny, Kerrykeel, Killygordan, Lifford and Creeslough.
While a number are trading well, it is believed a number of the stores are struggling.
The company, which has been listed on the Iseq’s junior exchange since 1997, already supplies milk to Connacht Gold and other co-ops, as well as manufacturing its own liquid milk and yoghurt products.
It has previously indicated its support for greater consolidation in the dairy industry, a policy endorsed by the Icos (Irish Co-operative Organisation Society).
Sligo-headquartered Connacht Gold is one of the largest co-operatives in the State.
Formed in 2000 following the merger of two Connaught-based co-ops, it had turnover of €300 million in 2010, up from €264 million the previous year.
Pretax profits rose to €5 million in 2010 from €1.8 million in 2009, due in part to the disposal of property.
Connacht Gold has previously indicated its interest in pursuing acquisition opportunities in 2011.
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