history came full circle yesterday with the announcement that a company owned by farmers was buying the Co-op's dairy operation for £75m.

The Co-operative movement began in the 19th Century with the formation of a number of societies, each striving to place fair prices above profit.

Yesterday, Dairy Farmers of Britain (DFB) said it would create the UK's largest milk co-operative with its acquisition of Associated Co-operative Creameries (ACC).

ACC, based in Blaydon, Gateshead, employs 3,500 people in the UK, including nearly 600 people in the North-East and North Yorkshire, and is Britain's fourth-largest milk co-operative with brands including Dairygate, Alive and Dawn.

It has 60 depots in the UK, including Stockton, Hartlepool, Ryehope, near Sunderland, Merrybent, near Darlington, and seven creameries, including operations at Blaydon and Whitby, North Yorkshire.

DFB said the acquisition would help it to become the UK's leading farmer-owned, broad-based dairy company.

DFB was formed in July 2002 by farmers dissatisfied with lack of control over, and returns from, the milk distribution system.

It markets about two billion litres of milk a year from about 3,250 member farms and supplies more than 100 national and regional dairy companies.

A DFB spokesman said: ''There will be a bit of restructuring and reorganisation in the next few months, but we are going to try to keep everyone's jobs.''

DFB chief executive Malcolm Smith said the deal would give it more flexibility to expand.

''We welcome ACC to DFB and look forward to an exciting future,'' he said.

The Co-op said in April that it had decided to explore options for selling ACC, which serves major retailers, food service outlets, food manufacturers and the catering trade.

Co-op Group chief executive Martin Beaumont said the dairy industry had gone through significant change in recent years and consolidation had resulted in fewer and bigger operators.

''The sale of ACC to DFB is a marriage of two successful co-operative enterprises creating a major new force in this competitive market.''

Sharon Ainsworth, national officer for trade union Usdaw, which represents 1,000 of ACC's workers, said: "There has been a great deal of anxiety among ACC workers for many months after it became known the Co-op was looking to sell this business.

"The announcement brings an end to the uncertainty and Usdaw is pleased the new owners are DFB as we feel they offer the best prospects for job security for our members.

"The company has plans for growth and investment," she said.