Glanbia Co-op to rebrand as part of buy-out

Glanbia Co-Op is proposing to buy out Glanbia plc’s 40% share in Glanbia Ireland.

One of Ireland’s best-known dairy co-operatives is to rebrand as part of its proposals to take sole ownership of Glanbia Ireland.

Glanbia Ireland, Ireland’s largest dairy processor, operates as a strategic joint venture, 60% owned by Glanbia Co-op and 40% owned by Glanbia plc. However, the co-op will buy out Glanbia plc’s holding in the firm.

On completion of the proposed transaction, Glanbia plc will retain its identity, while Glanbia Co-op and Glanbia Ireland will transition to a new identity approved by shareholders.

Avonmore is the obvious suggestion, as one of Glanbia’s best-known brands, and has been discussed within the industry. However, members may settle on something fresh.

The existing commercial arrangements between Glanbia Ireland and Glanbia plc will remain until the name change is implemented.

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 €8m related to pension, rebranding, and separation costs in connection with the proposed transaction. Glanbia Ireland will not be required to pay the dividend for the 2021 financial year (estimated at €14m) to the plc.

The co-op plans to fund up to half of the cost of the proposed transaction through the sale of around 11.5m shares in 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%.

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.

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 to drive higher returns for co-op members.

Glanbia Ireland is a €2bn agri-food and nutrition business, which includes 11 processing facilities, 52 agri branches, and 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 €1.9bn in sales and made €60m after tax.

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,” Mr Murphy 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.

“If our members approve this proposal, we will have a very strong co-op, with full ownership of Glanbia Ireland. We will remain the largest investor in Glanbia plc, which is focused on growing as a global nutrition company, benefiting all shareholders.

“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, added: “Glanbia Ireland, today, is a very strong standalone business, with circa €2bn of annual revenue. We have excellent people and great brands. Significant capital investment of €559m 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,” Mr Bergin said.

“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.”

However, agricultural organisations warned that 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.”

Irish Creamery Milk Suppliers’ Association president, Pat McCormack, said that he would look carefully at the proposal, before deciding whether to recommend it.