Hard cheese for jobs as Avonmore bids

Shares in Waterfood Foods, Ireland's biggest cheese maker, jumped 10p to 105p yesterday after rivals Avonmore Foods confirmed its bid for the company to create the UK and Ireland's leading milk producer. However, the move only served to heighten fears of job cuts at the combined group.

Avonmore, which saw its shares rise 1.5p to 220p, is offering one shares for every two in Waterford and claimed the bid was not hostile. Waterford's board and the farmers' co-operative which owns 68 per cent of the group said they were studying the proposal and would respond in due course. The bid needs the support of 75 per cent of the shareholders to succeed. The merged group would be called Avonmore Waterfood and have a turnover of Irpounds 2.5bn and pre-tax profits in the region of Irpounds 71.5m.

Both companies have an almost identical range of businesses including the manufacture of butter, cheese, liquid milk, animal feeds and fertilisers. Analysts say the merged group would benefit from substantial economies of scale and cost-cutting.

"They are a superb fit. There are tremendous cross synergies in their operations," said Liam Igoe, an analyst at Goodbody, the Dublin stockbrokers.

However, there has been speculation that 800 jobs may go in post-merger rationalisation after Avonmore said it would seek to cut costs in a glutted global milk market.

"The feeling here is one of concern," said Tony Mansfield, senior Amalgamated Transport and General Workers Union (ATGWU) official.

"There is a throw-way remark in the middle of all this analyst-speak on the merger that cost savings of up to pounds Ir20m could be made due to rationalisation of overlapping facilities. That obviously means closing down areas."

Avonmore has offered an extra 3.25p a gallon on the price of milk to farmers if the offer is successful, and Mr Mansfield believes job losses will pay for it.