Kerry Co-op agree change to transfer a 25% shareholding to Kerry Group

MEMBERS of Kerry Co-op have approved a change in shareholder regulations which is now likely to lead to the transfer of 25% of their shareholding to Kerry Group PLC.

With Kerry Group scheduled to host its quarterly shareholder meeting in Dublin this morning, stockbrokers are also predicting a lift in share price for the PLC.

At a meeting yesterday in the Brandon Hotel, Tralee, the co-op’s members effectively rubber-stamped a vote of a few weeks ago by members allowing for the regulatory changes. The vote allows the co-op’s board to lower its prior regulatory shareholding bottom threshold in the plc from 20% to 10%.

The co-op members yesterday voted 86.2% in favour of the rule change, with 13.8% voting against. Some 1,963 eligible voters were present. Of these, 1,692 voted in favour of the change.

A Kerry Group spokes- person said: “This is a very strong vote in favour of the change. The rule change now empowers the co-op to unlock 25% of their shares for transfer, if they so choose. This resolution is a matter for the co-op shareholders to decide.”

Until now, these co-op members have held a 22.8% stake (or 40.1m shares) in the PLC. Co-op members are now free to dispose of around 10 million shares, potentially bringing their shareholding down to 30.1m shares, or 17.1%. Whatever their decision, Kerry Group is sure to enjoy a significant liquidity boost.

For the co-op members, this share transfer would lead to a collective windfall of up to €280 million to €290m, depending on the value of individual shares sold.

The conversion rate for the shares is set at 6.66 plc shares for every co-op share. With plc shares at c.€29, the co-op shares would stand at around €193 each.

Kerry Co-op sold around 1.5 million plc shares in May. The shares were sold for €28.25 each giving a return of more than €42m.

In recent weeks, the shares have regularly stood at around €29, which when multiplied by the 10.1 million shares moving to the PLC amounts to a €290m windfall for shareholders, who can now either sell or hold onto the Kerry Group shares as they choose.

Of course, a large number of Kerry Co-op’s members also already own sizeable quantities of Kerry Group PLC shares on an individual basis. The general industry estimate is that co-op members currently hold up to 45% of the PLC’s shares.

In the past, many of these shareholders have kept a tight hold on these shares. It is expected that many will again retain ownership even if the co-op instructs members on their options in terms of selling their shares.

Industry analysts are widely expecting Kerry Group’s share price to rise on the back of yesterday’s concluding vote.

Goodbody Stockbrokers yesterday predicted an upturn in Kerry Group’s price from its position of around €26.50 yesterday. Goodbody is predicting earnings per share growth of at least 9%, which by year’s end could well see the share surpass the €29 value it held for much of this summer.

Goodbody yesterday stated: “We expect a positive interim statement from Kerry... We are looking for 9% adjusted EPS [earnings per share] growth to 86.1c, or 8% operating profit growth to €219.3m. Its guide for the year is 8-12% EPS growth, so there may well be some upside from our FY11 EPS of 208.6c (these were recently reduced by 1% to allow for exclusion of soft- ware amortisation from the usual goodwill add-back in adjusted eps calculation).

“Recent peer Q2 results have been mixed, notably the very disappointing result from Givaudan. However, we expect Kerry’s experience will be closer to, and better in some respects, IFF than to Givaudan.”

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