Ireland’s leading dairy co-op, Glanbia, has made an agreement to buy the 40% stake held by Glanbia plc in their joint venture Glanbia Ireland DAC.
The non-binding memorandum of understanding gives a purchase price of €307m (£262m), subject to contract negotiations and shareholder approvals for both parties.
The plc – which is leaving the dairy sector to focus on growing its core ingredients and nutrition divisions – will contribute €8m related to pension, rebranding and separation costs in connection with the proposed transaction. In addition, it is agreed that GI will not be required to pay the dividend payable to the plc in 2022 in respect of the 2021 financial year (estimated at €14m) and up to the closing of the proposed transaction.
Glanbia Co-op, which is looking to rebrand after the process is complete, says it will fund up to 50% of the consideration payable for the proposed transaction through the sale of shares in Glanbia plc (estimated at approximately 11.5 million shares), with the balance to be funded through borrowings.
Glanbia Co-op also proposes to transfer 12 million Glanbia plc shares to its members – worth an estimated €168m, or €11,028 for a member with an average shareholding.
This follows the spin-out of a total of 36.5 million Glanbia plc shares worth over €510m by Glanbia Co-op in 2013, 2015 and 2017. Glanbia Co-op is the largest individual shareholder in Glanbia plc, holding 93.3 million shares or 32.4% of the issued share capital. After the deal this shareholding will fall to 24%.
The co-op also proposes in the future to create an investment fund for its activities through the placement of up to 12 million Glanbia plc shares, with a current value of €168m.
Glanbia Co-op chair John Murphy said: “These proposals are driven by our ambition to pay the best possible price for milk and grain to our farmer 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. The board believes that now is the right time to take this step to create a well-invested, independent and future-focused co-op.
“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.“
CEO Jim Bergin 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. 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.”
Glanbia Ireland is a world-class integrated agri-food and nutrition business, with a diverse portfolio of quality ingredient solutions, leading consumer and agri brands. In the 2020 financial year, GI generated €1.9 billion in revenue and a profit after tax of €60 million.
Glanbia Ireland, which in 2020 generated €1.9bn in revenue and a profit after tax of €60m, has 11 processing facilities, 52 agri branches and over 2,100 employees. It is Ireland’s number one dairy company, with a 3 billion litre milk pool.
Glanbia Group managing director Siobhán Talbot has stepped down from the Board of Glanbia Co-op. T
Mr Murphy said: “Siobhán Talbot has provided outstanding leadership to Glanbia Co-op during a period of significant growth and development. We wish her continued success in her role as group managing director of Glanbia plc.”
Donnard Gaynor, chair of Glanbia plc, said: “Glanbia Ireland has a successful heritage, and for many years we have valued the partnership with Glanbia Co-op in creating a strong business under our joint stewardship. This is the right time for the proposed transaction. The co-op is the right owner to continue the strategic development of Glanbia Ireland for the benefit of the co-op’s members, and the plc can continue to maximise the opportunities for its own business in the post-Covid environment.”
However, industry organisations say members should carefully consider the proposals before approving 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, has said he would look carefully at the proposal, before deciding whether to recommend it.
