Dairy giant Arla Foods has agreed to sell a clutch of brands to received approval for its merger with Swedish dairy co-operative Milko.

The Swedish Competition Authority has approved the merger of the two co-operatives, which was announced a year ago, but only on the condition that Arla sell Milko trademarks Bollnäsfil, Tiger, Bärry, Fjällfil and Fjällyoghurt within six months, as well as the Milko dairy at Grådö in Dalarna.

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The director of Arla’s Swedish market, Christer Åberg, says the deal will help secure milk production in a large part of Sweden but warned jobs will be lost at the Grådö dairy.

“Via the merger, Arla will have access to more milk and will be in a position to continue to develop the Swedish dairy market for the benefit of employees, dairy farmers and consumers alike”, he said today (26 October).

“The merger will save dairy farmers in the region but it is important to bear in mind that the main reason for the merger is serious financial difficulties at Milko. As we must resolve these in the new organisation, we will not be able to save all the jobs at the dairy.”

Under the conditions of the merger, which will formally take place on 1 November, Milko members will become members and owners in Arla Foods under the same conditions as existing Arla members, the company said.

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Lars Reyier, Milko’s chairman, said the announcement is “long-awaited”. In July the struggling co-operative announced plans to lower the price it pays farmers by SEK0.20 (US$0.03).

“I am very relieved that we Milko farmers will be paid more for our milk from as early as 1 November”, he said.

“This represents a crucial boost to the finances of many Milko farms. And we, the board, are pleased to have succeeded in ensuring that all the Milko farmers have been offered the chance to continue to produce milk, even though Milko will now cease to exist as an independent association.”