IAWS Co-op examines its flotation options
IAWS Co-op boss Philip Lynch will summon shareholders to a meeting where they will vote on changing the status of the co-operative, before the end of May.
If that vote is positive, then Mr Lynch will move to the next phase of creating a market in the shares.
A full listing on the Irish Stock Exchange is his preferred option, but it remains to be seen whether that is achievable. One of the imponderables IAWS faces is just how many institutions or ordinary investors will want to buy into the enlarged company.
IAWS owns Irish Pride Bakery and Premier Proteins in Ballinasloe. It has 45% of French fertiliser group Cedest Engrais; 33% of Malting Company of Ireland and a half share in Greencore Ferry Services.
For €64m it hopes to acquire the wind energy division; biomass, waste and business outsourcing parts of SWS. Much of what SWS is bringing to the table is future potential and a lot of it, at that, if projections about wind farm earnings etc are delivered down the line. Some attempts have been made to value the combined businesses and a figure of up to €350m is being bandied about.
Given that SWS will bring a lot to the party, the €64m for €350m worth of assets looks like a steal for Mr Lynch.
That’s true on paper, but the reality is that to get the group to that kind of value will require investments of up to €150 million over the next two to three years and some very strong management as well.
To help boost the business further, Mr Lynch also has his eye on Greenstar, the NTR waste management subsidiary. Up to €130m of IAWS money has been sunk into NTR since the start of the year, which has given IAWS a 26% equity stake in the toll road, waste management and wind energy group.
It has been speculated all along that Mr Lynch wants the waste management end of NTR’s business operated by its Greenstar subsidiary in which NTR is planning to spend e100m over the next two to three years. It is not for sale.
And why Mr Lynch shelled out €130m of the co-op’s reserves to buy 26% of NTR still remains something of a mystery.
Even some of those close to him find it difficult to explain the rationale of the NTR move given the tight grip the Roche family has on the business and their determination to keep it intact.
The long-term implications of the NTR move or a full listing for the enlarged co-op could prove an irritant, some observes suggest.
In effect, if Mr Lynch does not get Greenstar from NTR, and few in the market believe he will, then he may end up locked into the company with little leeway to recover his investment. As the only major shareholder outside the Roche family and key management figures in NTR, the investment could frustrate the process of bringing the enlarged IAWS group to the market.
If Mr Lynch wants a full listing he will find it difficult to persuade fund managers to buy into a company that already has a 26% stake in a business over which he has no control.
The other side of that is unless NTR becomes massively profitable in the next few years the chances of Mr Lynch being able to recover his investment could be severely hampered.
From a strategic point of view, the near 40 Irish co-ops who own IAWS are thought to fully favour a change in the corporate status of IAWS.
If the group has tradeable shares, then the likes of Glanbia and Dairygold and, indeed, the Kerry Group will have greater options over the investments that will have a market value on them once the conversion is complete.
That still doesn’t answer the question about the attractiveness of an enlarged IAWS to the markets.
