Farmers urged to be cautious over Glanbia Ireland buy-out proposals
FILE PHOTO Irish-based nutrition group Glanbia has announced a 22.6pc drop in earnings from last year END 19/8/2011 Glanbia Ingredients factory. Pictured is the Glanbia Ingrediants LTD plant in Virginia, Co. Cavan, today (19/8/2011) Photo Mark Stedman/RollingNews.ie
Farm organisations have urged members to properly scrutinise proposals for Glanbia’s farmer-run division to buy out the publicly-listed company’s 40% shareholding in Glanbia Ireland.
Glanbia Ireland, Ireland’s largest dairy processor, currently operates as a strategic joint venture, 60% owned by Glanbia Co-op and 40% owned by Glanbia plc. However, the new plans will see it come under the sole ownership of the co-op.
A spokesperson for the co-op said the new ownership model would support the group’s ambitions to build one of Europe’s top dairy co-ops, while also offering greater flexibility to support members, pursue new opportunities and add value to milk and grain through innovation.
The co-op is also proposing a €168m ’spin-out’ of PLC shares to members and the creation of a €168m investment fund that will be available to pursue new opportunities with the aim of driving higher returns for co-op members.
Glanbia Ireland is a €2 billion agri-food and nutrition business, which includes 11 processing facilities, 52 agri branches and over 2,100 employees, and exports its products to more than 80 countries.
Within Ireland, the firm processes three billion litres of milk annually and is the largest buyer and user of grains locally, handling over 270,000 tonnes of Irish grains each year.
In the 2020 financial year, the business generated €1.9 billion in sales and made €60 million after tax.
A spokesperson confirmed that on Wednesday (November 10), Glanbia Co-operative Society signed a non-binding agreement with Glanbia plc to take full ownership of Glanbia Ireland.
However, the proposals will still be subject to the successful conclusion of contract negotiations, as well as shareholder approvals within both Glanbia plc and Glanbia Co-operative Society, and any necessary regulatory approvals.
Should the deal be given the go-ahead, Glanbia Co-op will pay €307m to acquire Glanbia plc’s 40% shareholding in Glanbia Ireland.
The plc will contribute €8 million related to pension, rebranding and separation costs in connection with the proposed transaction. While it has also been agreed that Glanbia Ireland will not be required to pay the dividend for the 2021 financial year (estimated at €14 million) to the plc.
The co-op plans to fund up to half of the cost of the proposed transaction through the sale of around 11.5 million shares Glanbia plc, with the balance to be funded through borrowings.
The proposals would reduce Glanbia Co-op’s shareholding in Glanbia plc from 32.4% to around 24%.
Glanbia Co-op also proposes to transfer, via Share Spin Out, 12 million Glanbia plc shares to all existing members of the society. Based on Glanbia plc’s closing share price of €13.98 on November 9, this would be worth around €168 million, or €11,028 to the average member.
This follows the spin-out of a total of 36.5 million Glanbia plc shares worth over €510 million by Glanbia Co-op in 2013, 2015 and 2017.
Glanbia Co-op proposes to create an Investment Fund, which will be available to pursue new opportunities for the Co-op. This Fund will be activated, when required, at a future date through the placement of up to 12 million Glanbia plc shares (valued at €168 million based on Tuesday’s share price.
At the forthcoming Special General Meeting, the board will also seek to retain the existing 3% contingency around the threshold for general business purposes.
Glanbia Co-op chairman John Murphy said these proposals were driven by an ambition to pay the “best possible price for milk and grain” to the co-op’s members.
“The proposal to take 100% ownership of the business closest to our farmers’ interests follows an independent strategic review undertaken by KPMG at the request of the co-op board,” he said.
“The board believes that now is the right time to take this step to create a well-invested, independent and future-focused co-op.
“This proposal is the latest step on our journey, which began in 2012 with the creation of the strategic joint venture between Glanbia Co-op and Glanbia plc.
“We will have greater flexibility to support our farmers and be equipped with a dedicated Investment Fund to help drive higher returns in the future. Our fully independent co-op will be run on pure co-op principles with strong financial discipline, an experienced leadership team and board.”
Jim Bergin, chief executive of Glanbia Co-op, said: “Glanbia Ireland today is a very strong standalone business, with circa €2 billion of annual revenue. We have excellent people and great brands. Significant capital investment of €559 million in recent years means our network of processing facilities are world-class, including our recently commissioned state-of-the-art Innovation Centre.
“We are very ambitious for this great business and are excited by the opportunities presented by this natural evolution to a pure Co-op. It will provide greater flexibility to support co-op members, pursue new opportunities and allow us to focus on adding value to our milk and grain for the benefit of our farmers.”
It’s resulted in a reshuffle of the top brass - managing director Siobhán Talbot will today step down from the board of Glanbia Co-op, while Jim Bergin has been appointed to the role of Glanbia Co-op chief executive.
Glanbia Co-op Chairman John Murphy said: “Siobhán Talbot has provided outstanding leadership to Glanbia Co-op during a period of significant growth and development for the Co-op and its Members. We wish her continued success in her role as Group Managing Director of Glanbia plc.” Transition arrangements On completion of the proposed transaction, Glanbia plc will retain its current identity while Glanbia Co-op and Glanbia Ireland will transition to a new identity to be approved by shareholders.
The current existing commercial arrangements between Glanbia Ireland and Glanbia plc will remain in place until the name change is implemented.
After the completion of the proposed transaction, certain corporate, business and IT services will continue to be provided by the PLC to Glanbia Ireland and Glanbia Co-op before being transitioned out.
Details of a Special General Meeting of Glanbia Co-operative Society will be announced soon.
However, agricultural organisations warned suppliers should carefully weigh up the proposals, before accepting them.
Irish Farmers Association president Tim Cullinan said: “This is a complex financial arrangement that will require careful scrutiny before members vote on the proposals. I would ask that Glanbia provide every opportunity for this plan to be discussed ahead of the SGM that will have to take place,” he said.
The IFA President said it’s important that suppliers will see benefits from this deal, if it goes ahead and said the association will be seeking a meeting with Glanbia as soon as possible to discuss the proposals.
“Glanbia has a three billion litre milk pool and takes in 270,000 tonnes of grain each year. It’s a major processor and buyer of what farmers produce so they should be a market leader in price,” he said.
IFA Dairy chairman Stephen Arthur added: “Whatever new structure may emerge, it has to return a leading price to the farmers. The business must seek to extract the maximum value from the market for the quality product that we sell to them.”
Irish Creamery Milk Suppliers Association president Pat McCormack said that the association would look carefully at the proposal before deciding whether to recommend it or not.
“With due respect to both the PLC and Glanbia Ireland, we will consider this in terms of how it affects the farmers. It’s not as simple as giving the farmers the room to decide their own milk price, we have seen over in the UK how a deceptively simple slogan like ‘Taking Back Control’ is actually a much more complex proposition than seemed at the time. There will be arguments for and arguments against and ICMSA will decide on a position after carefully looking at both.”
