Droitwich-based Milk Marque, the successor to the Milk Marketing Board, has acquired Community Foods, a market leader in the supply of organic, health and fair-trade food products for an undisclosed sum.
The acquisition completes an 18-month search by Milk Marque, which had previously been in wind-up mode following the break up of its milk trading operations in 2000, to find an attractive investment for its members.
It is believed the about turn was the result of pension legislation changes.
The Birmingham offices of Baker Tilly and HBJ Gateley Wareing advised on the deal.
Baker Tilly corporate finance director Simon Chapman, who originated and negotiated it, said: "Milk Marque's decision to go on the acquisition trail was prompted by a strategy to re-commence trading for the benefit of its existing 12,000 dairy farmer members."
Based in north London, Community Foods sources, wholesales and markets nuts, dried fruit, seeds, grains and branded health products and is regarded as the pioneer of the UK organic sector.
Customers include Tesco, Sainsbury and Holland & Barrett as well as a range of independent health food chains, food manufacturers and wholesalers.
Last year the firm generated a pretax profit of £3.4 million on turnover of £54 million. The business is headed by Bill Henry who was voted Organic Business Person Of The Year by the Soil Association.
Roger Evans, chairman of Milk Marque, said: "This is the start of an exciting new beginning.
"We believe that Community Foods is an excellent investment for shareholders and has healthy growth prospects. It brings with it a management team which is highly regarded in the industry and who are committed to driving the company forward in the growing natural food sector."
Mr Chapman added: Simon Chapman added: "This rates as one of the more complex mid-market deals with several unusual features, including the demutualisation of what was once the largest agricultural supply co-operative in the UK, the interests of 12,000 dairy farmers and an acquired business which is growing fast in an exciting sector.
"The directors of Milk Marque, all of whom are non-executives, successfully navigated through all the difficulties to achieve a great result."
Under the terms of the deal the management team of Community Foods will remain in place to run the business.