Robert Wiseman Dairies flagged the difficulty of the UK dairy market as the group, which grew from family farm in Scotland in the 1940s, agreed a £279.5m takeover by German-based yoghurt giant Theo Müller group.
The group said that its acceptance of the all-cash deal was taking place against a "backdrop of challenging economic and market conditions", which had prompted continued consolidation in UK dairy "as suppliers look to drive productivity and delivery benefits to customers".
While one margin pressure, the high plastics cost raising packaging prices, has "in recent weeks… reduced slightly", dairy groups face a setback in growing weakness in the market for bulk cream – a byproduct of milk processing used largely in baking products.
"Bulk cream values reduced over the Christmas/New Year period and are for this period below the levels attained earlier in the [financial] year," Robert Wiseman said.
"We wait to see if prices will recover in February and March. But if the current levels were maintained, profits generated in the [first three months of 2012] may be impacted unless there was either a compensating reduction in raw milk prices or increased milk selling prices."
A fall in milk costs, and rise in selling prices, "are both unlikely to be achieved" ahead of the year end.
'Strong commercial sense'
The comments came as Robert Wiseman Dairies - which grew from a family farm operation in East Kilbride in the 1940s to the provider of one-third of British milk – said it had agreed a takeover priced at 390p a share.
Wiseman shares have not seen such a level since before a profit-warning in September 2010.
Müller has received pledges to accept its offer from Wiseman's founding family, who own more than 35% of the shares, and a letter of intent from UK dairy co-operative First Milk, which has a 10% stake.
The tie-up will marry Wiseman's milk production operations to Müller dairy processing operations, of which one is based in the UK, with a further four elsewhere in Europe.
"The combination of Müller and Wiseman brings together two complementary players in the British dairy industry," takeover documents said.
Robert Wiseman, the Wiseman chairman, said that the deal "makes strong commercial and strategic sense, creating a leading integrated dairy business in the UK with complementary positions in the yoghurt and potted desserts market and the fresh milk market".
The documents added that Müller had "no current intention" to change Wiseman plant locations or lay-off staff, and that it would keep the UK's group's Scottish headquarters.
"However, as with any acquisition, Müller expects, on gaining control of Wiseman, to review the business and may identify certain operational changes which may impact the group."
Wiseman shares stood 18.5% higher at 388.8p in afternoon deals in London.