Both companies already have a significant presence in the UK market. The Flagship group comprises Roach Foods, Dalehead Foods, Flagship Fresh Meats (the business acquired from Glanbia PLC in 2003) and BQP Pig Farming Enterprise. Tulip Ltd has several processing factories in the UK including Hygrade acquired in 2003.
The new group will cover the complete range from farm to fork, including pig production, abattoirs and fresh meat operations, as well as significant bacon, cooked meats and other further processed products. The UK sales of the new group will be close to £1 billion, and it will employ almost 7,000 people across 21 sites.
Carsten Jakobsen, present chairman of Tulip, will chair the board of the new group and Graham Roach, chief executive of Flagship Foods, will become an executive director. Flagship chairman Tony Ambler will also join the board and continue to be involved with and maintain responsibilities for the Group's primary production activities.
"We have a long and successful partnership with Danish Crown as a major supplier, so bringing these businesses together makes a lot of sense," said Roach. "In an increasingly competitive marketplace it is crucial that we are in a position to produce quality products at the best price. This merger will benefit our customers, suppliers and employees."
Carsten Jakobsen said: "This is an important strategic step forward for Tulip. This transaction will help us to supply the UK consumer with an even wider range of quality meat products.
"We are delighted that the two companies will be joining forces and see ourselves as a UK meat business which is set to work closely with our UK supermarket customers and suppliers. We look forward to enhancing the close working relationship with UK livestock farmers and manufacturing customers that Dalehead Foods has developed so successfully, and we are confident our involvement will bring further benefit to all parties."
The transaction is conditional upon competition clearance by the European Commission. Both parties have agreed not to publish financial details of the deal.
The UK pork processing industry is in need of a boost. Processors have pointed out that retail drives to reduce food prices could further undermine the sector. According to Farmers weekly, the farm to retail price spread has dropped from 284 per cent to 271 per cent for fresh pork over the past six months, while the bacon spread has narrowed from 374 per cent to 335 per cent over the same period.
This, says the publication, has been caused by higher producer returns rather than price cuts at point of sale. But the pork industry is concerned that further cuts in retail margins may lead to increased imports. The Meat and Livestock Commission has calculated that the UK is now only 47 per cent self-sufficient in pig meat.
Indeed, a recent analysis of the domestic supplier market by the British Pig Executive (BPEX) shows that in the last five years there has been a dramatic increase in imports of pork, bacon and other processed pig meat products. Between 1998 and 2002, total pig meat imports increased by 273,000 tonnes (product weight) or 34 per cent.
The growth in imports has, in part, been a response to the fall in production in the UK. However between 1998 and 2002, exports of pig meat from the UK fell by 150,000 tonnes, which helped to offset more than half of the decline in UK availability.
The main suppliers of pig meat into the UK are Denmark and the Netherlands followed by France, Ireland and Germany. In recent years, the Netherlands has taken the greatest share of bacon imports while Denmark dominates fresh and frozen pork imports.
Bacon imports are dominated by The Netherlands and Denmark. In 1998 these two countries supplied the same volume and collectively accounted for 92 per cent of all imports. By 2002, imports from The Netherlands had increased by 16 per cent despite a sharp fall in Dutch pig production.
The UK has universally applied minimum production standards that are higher than in most other EU countries. In addition, over 90 per cent of UK pigmeat is produced under internationally recognised Quality Assurance Schemes that operate above the legal minimum standards.
BPEX says that while some countries have tried to encourage the production of pigs to a so-called 'UK Specification', the number of pigs currently being produced is completely inadequate to meet the volume currently imported.