Splitting Dairygold could prove a watershed
While the vote will separate out the non-dairy businesses it will remain a wholly-owned subsidiary of the dairy co-op.
This will be a watershed for the group whose farmer owners are in no rush to have any of its assets sold off in a stock market flotation.
That was a key point to emerge from meetings with the general committees of the co-op when the stakeholders made it clear they did not want to have their assets in the business diluted at their expense.
If the proposals are accepted, which is highly likely, then Dairygold will be turned into two separate businesses with different boards of directors.
Given the proposed move the big question is: When will the hived off business debut on the stock market, and under what terms?
The group’s chief executive, Jerry Henchy, believes the new wholly owned subsidiary will be a launch pad in the drive to add value to the worth of the shares held in the group, traded twice a year under co-op rules.
In time, and that time frame is the question, Mr Henchy expects to put some form of flotation proposals to the general body of shareholders.
That seems to be the implicit aim of farmer shareholders who have made it plain they want the value of their holdings enhanced and protected over time.
However, Mr Henchy is on record as saying a serious acquisition is needed to give the consumer foods business some brand depth and to enhance its credibility with financial institutions.
Without some serious brands in the tank the stock market will not back a flotation that hasn’t got the management and brand depth to compete at the highest level.
In a recent interview Mr Henchy said the group has two options regarding consumer foods. It could sell it now and get a good price for the business or develop it though acquisitions, adding value along the way to the benefit of all.
Dairygold farmers have been very smart about the way they are going about this process of evolution.
They have seen the result of the flotation of other dairy groups, and have decided to be more careful about how they go about protecting their futures in an environment that is undergoing rapid change.
If they hope to have a future in dairying then they have to protect the value of their milk, which will not be an easy task given the enormous changes taking place in the farming sector.
The new structure aims to provide Jerry Henchy and his executives with a means of growing the various businesses while protecting farmers.
That milk price must not suffer to shore up any under performance in the other aspects of the business is the directive Henchy has been given by his stockholders.
For many years it had become apparent, indeed glaringly obvious to some, the Plc structure embraced by the dairy co-ops in the 1980s contained conflicting goals that could not be easily satisfied where fund managers and milk suppliers had conflicting needs.
Farmers wanted value for their milk while the fund managers investing in the Plc’s wanted a return on their investments to meet their obligations to clients.
In recent years in particular, those twin ambitions have collided as farmers saw their incomes undermined while poor stock market returns made life difficult for fund managers invested in the dairy sector in Ireland.
Farmers faced a double whammy as a result and it is obvious that Dairygold farmers are intent on avoiding those pitfalls in the years ahead.
Their ambitions may not be that easy to realise and if any move towards some form of market listing is to be realised the group will need luck as well as sound judgement to get to where its farmers want to take it.
