The parties have signed a letter of intent and are looking to close the transaction by 1 May 2018.

Arla Foods said that its decision to sell the plant is because the production and distribution of the specialty cheese produced by it no longer corresponds with the orientation of the company’s businesses across Germany and Europe.

With a present workforce of 84 people, the Sonthofen dairy site produces various specialty cheeses including Alp cheese, red wine cheese and wheat beer cheese.

Arla Foods Europe head, executive vice president Peter Giørtz-Carlsen said: "All of our production sites in Germany are focused on supplying both the German market and our export markets, playing a crucial role in our delivery of the Arla Group strategy, Good Growth 2020.

“However, since the site in Sonthofen no longer corresponds with our overall strategic aim, we are pleased to have found a suitable buyer to continue its production and legacy.”

Arla Foods said that it plans to continue supplying milk to the cheese production plant in Sonthofen for an initial period following the completion of the sale due to the milk supply contracts with dairy farmers from the Allgäu region, with most of them valid until the end of 2019.

Apart from that, after the sale process is completed, Allgäuer Hof-Milch is expected to continue to produce cheese products for the Danish dairy company until further notice. This will enable Arla Foods to satisfy the current contracts it has with certain retail customers.

Arla Foods’ other dairy site in the Allgäu region in Bad Wörishofen will not be impacted by the proposed transaction with Allgäuer Hof-Milch. Currently, the dairy co-operative is assessing various strategic options for the Bad Wörishofen in line with an announcement made in November 2017.

Earlier this year, Arla Foods said that it will close the Brabrand Dairy in Aarhus, Denmark in mid-2019 due to a growing demand for yogurt products from European consumers and a lack of expansion options at the site to facilitate additional production.

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