Glanbia co-op members urged to vote yes to dairy processing plan

Members of Glanbia Co-op are debating the pros and cons of a joint venture proposal which could see them acquire a 60% stake in Dairy Ingredients Ireland, the Glanbia group’s Irish dairy processing business.

The near 7,800 members are to vote on holding company Glanbia Plc’s joint venture proposal in local polling stations on Nov 13.

The co-op and plc have agreed upon a contract for the joint venture, and it is now up to shareholders to vote upon the formula. The co-op has approved a ‘yes’ vote. More than 50% of members must approve the proposal for it to go through. In effect, they are being asked to take on ownership of milk production expansion plans for the post-quota era after 2015.

Glanbia chairman Liam Herlihy said: “A ‘yes’ vote on Nov 13 will usher in a new era for milk production growth. While the society will acquire the controlling (60%) stake in the new business, Glanbia plc will remain significantly involved in the business as a 40% partner. In addition, the society will continue to be a significant shareholder in Glanbia plc.

“The proposed structure means farmers will have 60% ownership of assets that are critical to milk production and expansion. The new business will have a separate board, with proportional representation and it is this board which will make all decisions, and agree the milk price and strategy for GII.”

The joint venture proposes a spin-out (or distribution) of 7% of plc shares to members — valued at €142m, based upon the closing price of €6.90, on Sept 28. The price stood at around €7.30 yesterday, while its 52-week high was €7.38. The share value has risen by around 60% in the past year.

The plan has been the subject of a series of information meetings hosted by Glanbia in recent weeks. These 40 or more meetings are ongoing, and Liam Herlihy urged shareholders to attend and gain clarity on the proposal.

Meanwhile, IFA dairy chairman Kevin Kiersey has also urged Glanbia shareholders to attend the meetings. He described the JV proposal as “balanced” but urged farmers to attend meetings, gather information and to make up their own minds.

“The Glanbia JV proposal is a balanced way to return dairy processing into farmer control while, through the share spin out, allowing all shareholders to hold or realise Plc shares which could make an important contribution to their on-farm investment or other financial needs,” Mr Kiersey said.

“We have sought clarification of some of the financial details, including the pension scheme provisions, and will obtain independent assessment of these as required.

“We have also asked Glanbia to remain flexible in order to respond to farmers’ concerns on a number of issues including giving an uplift or shareholding in exchange for the revolving fund of 2c/l on growth milk and we also need to see milk pricing mechanisms to help farmers deal with volatility. IFA will also want to secure the relationship with the Agribusiness division, which is to stay with the Plc, regarding merchant credit for farmers.”

The idea is that the 7% spin-out and the sale by co-op members of a further 3% of their shares in the plc back to the plc’s board will provide farmers with the investment capital needed for milk processing expansion.

Glanbia Plc estimates that the JV model would see the co-op’s members debt-free within two years. At present, the co-op’s members are the 54.4% majority shareholder in the plc.

The JV-focused sale and spin-out will see its holding reduced to 41.4%, valued at around €842m, which will still keep co-op members in the position of being the single largest shareholder in the plc.