CONNACHT GOLD is set to buy Donegal Creameries’ milk and retail businesses in a deal worth a potential €21 million.

The pair confirmed yesterday that co-operative Connacht Gold had agreed to buy the milk and retail store operations of Dublin-listed Donegal Creameries.

Connacht has agreed to pay €13.5 million for the two operations on completion of the sale.

The agreement provides for a further payment of €7.4 million, depending on the division’s financial performance in 2012.

The sale is subject to the approval of the Competition Authority.

The two businesses earned profits of €1.85 million last year on a turnover of €69.3 million.

The milk business consists of liquid milk sold directly to consumers, retailers, restaurants, food service companies and other customers.

The retail business is made up of 11 stores in the northwest selling fertiliser, feeds and general farm supplies. Donegal Creameries will use the proceeds for general corporate purposes. It intends keeping its seed, dairy, feeds and property operations.

Connacht Gold Co-Op is based in Tubbercurry, Co Sligo. It is a large, multi-purpose co-operative with businesses in dairy processing, consumer foods, feed milling, retailing, livestock and sawmilling.

It has 30 stores throughout Connacht, Leinster and Donegal and four livestock marts in Mayo, Sligo and Leitrim. It had a turnover of €300 million last year and pre-tax profits of €5 million.

The co-op has more than 14,000 farmer shareholders.