Glanbia move on British market

GLANBIA plc and Milk Link are to form a joint venture company to serve the British cheese market.

It is to be called Cheese Company Holdings (CCH) and will be 75% owned by Milk Link and 25% by Glanbia plc.

Milk Link is owned by some 2,400 British dairy farmers who produce around 10% of the UK’s annual milk capacity (1.4 billion litres.)

CCH will be the second largest cheese producer in Britain and will address the strategic objectives of both Glanbia plc and Milk Link.

Glanbia Cheese, the group’s pizza cheese joint venture with Leprino Foods Company is unaffected by the transaction.

CCH will be established with a capital subscription of £16.9 million by Milk Link for its 75% controlling stake and an initial £5.6 million (€8.3 million) by Glanbia for its 25% interest.

Simultaneously, Glanbia will sell 100% of Glanbia Foods Ltd, the second largest integrated cheese producer in Britain, to CCH for £94.3m (€140.1m).

CCH will operate four processing facilities and a consumer packing facility and employ some 1,000 people. Six of its directors will be from Milk Link and two from Glanbia.

Glanbia group managing director John Moloney said the transaction will facilitate its strategic focus on high growth areas such as consumer products, dairy ingredients and, in particular, the nutrition market.

“At the same time, it allows us to maintain both access to the British market for our Irish cheese production and a continuous supply of products to serve our growing nutritional, ingredients and mozzarella businesses,” he said. Barry Nicholls, Milk Link chief executive, said the joint venture with Glanbia confirms his company’s position as Britain’s premier farmer-owned integrated dairy business. “By securing an additional 620 million litres of milk processing capacity, we are now able to process and add value to up to 80% of our members’ milk.”

Both parties have also agreed to provide further financial support for the new venture. Glanbia will contribute of £8.8m (€13.1m) in the form of a share premium spread over four years.

Milk Link will contribute an annual amount of £2.5 million in connection with an exclusive milk supply contract with Glanbia Foods, reflecting the synergies it expects to generate. Glanbia plc expects the sale to result in an exceptional charge of €49.1 million (£35.0 million) in accounts for the year ended January 3, 2004.

The effect of the transaction on the earnings of the group is expected to be broadly neutral.

Glanbia will use the proceeds of the transaction to invest in growth opportunities in its core markets.

The transaction is conditional on approval by the Irish competition authorities and the Milk Link Member Council. It is expected that these conditions will be fulfilled, and the transaction completed by the end of March.