Farmers welcome Glanbia proposal

Farmers have given a cautious welcome to Glanbia’s plan to sell 60% of its Irish dairy business to Glanbia Co-op, creating a new Glanbia Ireland joint venture in a deal worth €112m.

In the deal, Glanbia co-op members will share a €100m spinout of Glanbia plc shares, while also creating a €40m member-support fund. Glanbia Ireland will be a €1.5bn diversified business 60% owned by farmers; it unites Glanbia Ingredients Ireland, Consumer Products and Glanbia Agribusiness.

IFA president Joe Healy said the €40m fund would offer Glanbia farmers some protection from global market volatility, saying the fund would “hopefully not be required for quite some time”. He said it was crucial the new joint venture would pay a commercially competitive base price at all times.

Mr Healy said the proposal had positive and some more challenging aspects, and he said all Glanbia Co-op shareholders should inform themselves fully at a series of information meetings before the required shareholder vote later this year.

TJ Flanagan, CEO of the co-op umbrella body ICOS, said: “This move is a strong endorsement of the co-op model as the most appropriate mechanism to strengthen the position of farmers, and a demonstration that, despite the complex evolution of the model in Ireland, the core principles of co-operation still stand strong.”

The release of the new joint venture proposal coincided with the company unveiling operating profits of almost €248m for 2016. Glanbia announced an 11.2% rise in earnings per share of 87.66c, higher than expected. Earnings from wholly-owned business of €305.1m were up 12.5% on the prior year. It was the seventh straight year of double-digit growth for the company.

Siobhán Talbot, Glanbia group managing director, said: “I am pleased Glanbia had a strong group-wide performance in 2016. It has been an exciting start to 2017 with a number of key strategic initiatives progressing which will shape the future direction of the group.”

In a commentary on Glanbia’s results, Merrion Capital stated: “Glanbia recently announced the acquisition of Amazing Grass and Body & Fit which fits within their Glanbia Performance Nutrition division. Further to this, Glanbia also announced it was in talks with Michigan farmers about the €400m cheese and whey joint venture facility. Combined, this is expected to result in a cash outlay of c€300m.”

Merrion has downgraded its ‘buy’ recommendation to ‘hold’. Glanbia’s share price has risen 21% since January when Merrion issued its ‘buy’ advisory at €15.70. The share price climbed c.7% on the London Stock Exchange yesterday to around €18.50.


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