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The Central Bottling Company, more commonly known as Coca Cola Israel, has agreed to buy out the Tara dairy cooperative for $39 million.

The agreement, signed in principle yesterday, is subject to due diligence and several approvals.

Tara was established in 1942. The milk, dairy and cheese producer is controlled by a group of 33 families. Tara's dairy is located in Tel Aviv and the company employs 600 people.

Tara is the third-largest player in the local dairy industry with 12 to 14 percent of the market - estimated at around NIS 4.5 billion - trailing market leader Tnuva and Strauss. Tara's 2002 sales were over $100 million.

"We view the agreement with the Central Bottling Company as an important breakthrough that will drive the company forward and contribute to advancing its marketing, consumer and commercial activities," Tara's chair, Tova Avrech, said yesterday.

Central Bottling Company President Ron Kobrovsky said the acquisition was designed to expand the company's product range and get it into the dairy sector, mainly dairy beverages, which is a growing sector in the local market.

"Tara has market orientation, quality products and a high level of technology," Kobrovsky said, adding that Central Bottling will spend the next few months studying the company and the sector while consolidating a business plan with Tara personnel.

The present structure, in which Tara was controlled by all 33 families in tandem, had hampered business development.

Tara's former management had been examining ways to incorporate it, including an option to float the company on the Tel Aviv Stock Exchange.