Co-op plans to buy dairy and agri parts of plc

By Brian O’Mahony

Thursday, March 11, 2010

GLANBIA Co-op, which owns 54% of Glanbia plc, has announced its plan to buy the Irish dairy and agri businesses of the plc.

The move would require a significant writedown of its interest in the plc.

The buyout could pave the way for major rationalisation within the dairy sector, but that was not the main aim of the plan, Glanbia Plc chairman, Liam Herlihy, said.

At present, the co-op consists of roughly 7,000 farmer shareholders, and it will take a 75% vote to get the deal over the line.

Planning for this move have been underway since November 2009, when the co-op board appointed KPMG Corporate Finance and Geoff Meagher, the former finance director of the plc, to advise them.

The deal would give the co-op charge of a €1 billion industry that is faced with an uncertain future.

Backing the plan, John Moloney, chief executive, Glanbia Plc, said it offered farmers "ownership control and influence over the Irish businesses that are most relevant to them."

It would be "premature to speculate on the financial shape of this," he said, adding that a deal could be in place within a matter of months.

Irish Farmers’ Association president John Bryan, welcomed the move saying it holds out the prospect of farmer ownership of Ireland’s largest milk pool.

IFA Dairy Committee chairman Kevin Kiersey will meet with Glanbia today to review the details of the negotiations and their implications for farmers both within Glanbia and nationally, the IFA said.

RTÉ’s reported that some dairy farmers argued "they generated the wealth that propelled Glanbia onto international markets," adding that the announcement does not have the backing of many co-op members who supply milk to the group.

Fine Gael Senator John Paul Phelan said co-op members should be "ruled by their heads rather than their hearts" and must be given an independent, forensic analysis of the state of its Irish operations before a decision is made.

"Now is a time for cool heads," he said. "This has the potential to be a good deal for farmers in the Glanbia area and the dairy industry in Ireland and drive the rejuvenation of the entire dairy sector.

"Glanbia has been a two headed monster of sorts over the years. As a plc it has been focused on delivering profits to shareholders but this has been a source of much frustration to farmers who, as members of the co-op, have seen the plc lag behind in terms of milk prices."

Kerry Group plc is just 23.8% owned by its co-op at this stage. The plc shares are worth over €1bn at today’s price. Buying Kerry’s dairy interests is not seen as strategically necessary for the group, according to market sources.

This appeared in the printed version of the Irish Examiner Thursday, March 11, 2010