Job fears for 50 as Dale Farm buys co-op
County Armagh farmers' co-op Fane Valley is selling its milk business to Dale Farm for an undisclosed sum, citing increased competition in the sector.
Fane Valley Co-Op Society said the shutters would come down on its Newry plant where up to 50 people face redundancy.
It will keep its powder and butter processing operations in Banbridge.
Dale Farm, owned by United Dairy Farmers, is already the biggest dairy processor in Northern Ireland, with recent profits of £4.4m. The purchase of Fane Valley's milk operation, subject to approval by the Office of Fair Trading, strengthens its position.
The co-ops have already worked together, with Fane Valley buying raw milk from United since 1995.
Trevor Lockhart, chief executive of Fane Valley Co-op, said: "The liquid milk market in Northern Ireland has become increasingly competitive over recent years, with a combination of increased raw milk and processing costs contributing to declining processor margins.
"Against this background, cost efficiency has become an increasingly important factor in ensuring that a viable business model can be sustained in this harshly competitive sector.
"The board of Fane Valley, having considered the current and anticipated future competitive demands in the liquid milk market, has therefore concluded that the closure of its Newry dairy and the separate sale of its liquid milk business is in the best interests of the society."
Mr Lockhart said Fane Valley had a "strong reputation" in liquid milk "due entirely to the commitment and dedication of our staff".
"The society very much regrets that redundancies may result from the proposed changes."
Dale Farm group chief executive David Dobbin said Fane Valley's liquid milk business would be a "good fit" with its operation.
"The proposed purchase of Fane Valley's liquid milk business will allow United's farmer members to continue to supply milk to Fane Valley liquid milk customers and improve the viability of the supply chain in the current very competitive markets."
Last month United announced profits before tax and employee pensions of £4.4m.