Major shake-up at Kilkenny food giant
Glanbia Co-operative Society has signed a non-binding agreement with Glanbia plc to take full ownership of Glanbia Ireland (GI).
Currently, Glanbia Ireland operates as a strategic joint venture, 60% owned by Glanbia Co-op and 40% owned by Glanbia plc.
Subject to the successful conclusion of contract negotiations and the relevant shareholder approvals within both Glanbia plc and Glanbia Co-operative Society, Glanbia Co-op proposes to pay €307 million 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. 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 €14 million) and up to the closing of the proposed transaction.
Up to 50% of the consideration payable for the proposed transaction will be funded by the Co-op 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, via Share Spin Out, 12 million Glanbia plc shares to all existing Members of the Society. Based on the Glanbia plc’s closing share price of €13.98 on 9 November 2021, this would be worth approximately €168 million, 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 €510 million 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 of the company.
Glanbia Co-op also 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 (value of €168 million at current share price).
Following the completion of the Glanbia Ireland transaction (4%) and spin-out of PLC shares to Members (4%), Glanbia Co-op’s shareholding in Glanbia plc will be reduced from 32.4% to approximately 24%. In the event that the full Investment Fund is deployed, Glanbia Co-op’s shareholding in Glanbia plc would be reduced to approximately 20%.
At the forthcoming Special General Meeting (SGM), the Board will also seek to retain the existing 3% contingency around the threshold for general business purposes.
Commenting on the proposals, Glanbia Co-op Chairman 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.
“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.
“The Board have also decided that it is appropriate that all our Members would benefit at this time through the distribution of a proportion of the value created by our investment in Glanbia plc.”
Glanbia Co-op chief executive Jim Bergin added: “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.”
Glanbia Group Managing Director Siobhán Talbot will be stepping down from the Board of Glanbia Co-op. The Board has appointed Jim Bergin to the role of Glanbia Co-op Chief Executive.
Irish Farmers Association (IFA) President Tim Cullinan said the announcement that Glanbia Co-op is taking full control of Glanbia Ireland is “a significant step for the business”.
Mr 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.”
The IFA said it will be seeking a meeting with Glanbia as soon as possible to discuss the proposals.
Mr Cullinan stressed it is important that suppliers will see benefits from the deal if it goes ahead.
“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.