Waterford boards back new Avonmore offer of £337m

PLANS for a merger between too of Ireland's biggest dairy companies are back on track, after the two main boards controlling Waterford Foods recommended a new £337 million offer from Avonmore Foods. The proposal must now be approved by the farmer shareholders of both groups and a major programme to try to win their approval will be launched today by management from both companies.

The board of Waterford Foods plc accepted the improved terms from Avonmore yesterday afternoon. Early today the board of Waterford Co Op, representing farmers who own the majority of the group's shares, also said that they were recommending the deal.

Avonmore Foods, which first approached Waterford in April, tabled a significantly improved offer early yesterday, after intense discussions with Waterford Foods and its advisers. It offered £337 million, compared to £281 million in the initial offer. Waterford shareholders are being offered 142p a share, compared to yesterday's closing price of 110p. The proposed representation of Waterford farmers on the controlling boards of the new Avonmore Waterford Foods has also been increased. And the terms guarantee a milk price 3p above the national average for Avonmore Waterford farmers until the year 2000.

The terms of the deal are seen as very attractive to Waterford farmers. It is understood that there was just one dissenting voice on the Waterford plc board to the proposal. But around a half dozen of the 35 coop board members dissented, highlighting that the 75 per cent approval needed at two successive general meetings of coop shareholders cannot be taken for granted. Avonmore farmers must also approve the deal.

The merger would be the biggest shakeup ever in the Irish dairy sector, creating one of the biggest dairy companies in Europe with a turnover of £2.5 billion. Yesterday, Waterford Foods shares rose from 98p to 110p on the stockmarket, as investors reacted to the news that the deal might be back on.

The chairman of the Waterford boards, Mr John Dowley, said the revised plan would serve the best interests of farmers and all stake holders. Mr John Duggan, the Avonmore chairman, said that the merger "will bring significant benefits to both organisations."