Avonmore Waterford will be a major player in any consolidation in the food industry and would look at acquisitions costing £200 million to £300 million from the year 2000 onwards, chief executive Mr Pat O'Neill has stated.

"I don't think you're going to get worthwhile rationalisation in the sector unless you are prepared to spend £200 million or £300 million at a time from then on," Mr O'Neill said.

He added that Avonmore Waterford would target companies in its core dairy and meat businesses, and particularly become involved in any rationalisation in the British liquid milk industry where the group already has a 14 per cent market share.

Avonmore Waterford's 14 per cent share puts it in third place in the British milk market, behind Express Dairies' 21.5 per cent and Unigate's 17 per cent and ahead of the Danish-owned MD Foods and Dairy Crest which each have 12 per cent. There has been periodic speculation that MD's Danish owners have tired of MD's poor performance and would sell if they got the right price.

And between now and 2000, Avonmore Waterford would also look to be involved in the rationalisation of the milk industry in ways that do not require a major cash outlay - possibly through mergers and joint ventures, he added.

The group wants to increase its British milk market share from 14 per cent to 20 per cent, and would consider co-operation agreements on a 50-50 or 60-40 basis with other processors. "It doesn't necessarily require major cash outlays to achieve rationalisation," he stated.

With net debt at the end of 1997 of £337 million - reduced to under £300 million as a result of the recent asset disposals in the UK and the American mid-west - Avonmore Waterford's ability to make major acquisitions is clearly restricted in the short-term given that interest was covered just 2.8 times by operating profits last year.

That level of debt is expected to fall steadily over the next three years and by the end of 1999, analysts are forecasting debt of £260 million to £270 million, interest cover at a much comfortable level of 4.5 times and a debt/equity ratio down to around 70 per cent.

That sort of balance sheet will put the group in a strong financial position to become involved in any rationalisation in the UK, the most likely area for significant acquisitions.