Glanbia shareholder ballot welcomed

The mood in Gowran Park, Kilkenny, yesterday was one of cautious relief.

Close to 82 per cent of voters backed the first of two votes on a proposal which will see the sale and spin of 10 per cent of Glanbia co-op’s holding in Glanbia plc. The co-op already reduced its holding from 54 per cent to 51 per cent earlier this month as part of the deal to form a joint venture with the plc to run the company’s dairy ingredients business.

Welcoming the results of the ballot, Glanbia chairman Liam Herlihy (right) urged co-op members to attend the second vote on the proposal. If endorsed on December 12th, the deal will see farmer shareholders receive something of a windfall in the form of €157 million worth of plc shares, while 3 per cent of its shareholding will be used to fund the new joint venture.

But the proposed deal will also have positive implications for Glanbia’s investor profile.

One of the obvious outcomes of the proposed deal will be an increase in the number of Glanbia shares in freefloat. Though one of Ireland’s most successful companies, the dominance of Glanbia co-op on the shareholder register has constrained investor activity.

In addition to the co-op’s shareholding in the company, it is estimated that farmers hold an additional 10-15 per cent of the company individually.

The probable decrease in Glanbia co-op’s shareholding to 41 per cent will increase liquidity, although farmers, together with their individual holdings, will still control more than 50 per cent of the plc’s shares.

It is also likely that many of the farmers in receipt of the share spin-out will choose to hold onto their shares rather than sell them on the market.

Nonetheless, liquidity in stock is bound to increase.

Already the 3 per cent of the co-op’s shares that were offloaded last week was oversubscribed, with investor interest from the US, UK and France. The fact that there will no longer be a 51 per cent shareholder on the register if the proposal is endorsed on December 12th is also likely to encourage institutional investors to buy in to Glanbia. With activity in many Irish equities continuing to be weak, any boost to share activity and liquidity is welcome news in terms of Ireland’s investment profile.

Pharma in rude health or at patent cliff?

Could it be that we worry too much about the health of our pharmaceuticals sector?

The industry, among others, points regularly to the export performance of the sector – about half of all exports are accounted for by pharmaceuticals, a not-inconsiderable €55 billion last year according to the Central Statistics Office.

It is seen as a critical employer in the economy, particularly of more highly qualified staff and a core contributor to the exchequer.

However, a new report from Davy economist Conall Mac Coille takes a decidedly “left-field” approach to the importance of the sector.

Addressing concerns about the impact of the patent cliff – the expiry of patents on a generation of blockbuster drugs that have driven profits in the sector over the past decade, MacCoille argues that the likely impact on the Irish economy is “wildly overstated”.

His comments come against the background of a 35 per cent decline in pharmaceutical output in September, according to Central Statistics Office figures and the decline by a third in the exports of organic chemicals.

MacCoille does not challenge the overall export share of the sector but notes any sharp decline in exports would also see a notable decrease in service imports due to the importance of licence and royalty fees in the sector. This, he argues would limit the impact of the fall in exports on Irish gross domestic product.

Given the high productivity in the sector, he also sees little risk of a sharply adverse impact on unemployment figures as a result of any crisis in the sector.

While the patent cliff is a concern, it is not clear it has aroused the “appalling vista” in Ireland to which MacCoille refers. This is perhaps down to the Government having more immediate and tangible issues to worry them at present.

However, it is unlikely they will be as sanguine as the economist about the impact of a fall of up to €500 million in corporation tax revenue from the sector.

Mac Coille notes this equates only to 0.25 per cent of GDP compared to the budgetary adjustment of 2.1 per cent next year. But, given the Government’s difficulties in finding the wherewithal to deliver that, they would hardly welcome any further fiscal challenge.

Three-letter brigade pools acronyms

It was a feast of acronyms as the European Investment Bank (EIB), the European Investment Fund (EIF), Bord Gáis Energy (BGE) and Allied Irish Banks (AIB) held a meeting of minds in Dublin yesterday. Refreshingly, the three-letter brigade was on this occasion bearing good news for Irish finances, with the provision of up to €280 million in bank funding for small businesses and €155 million for State utility Bord Gáis.

The man at the helm of both initiatives was European Investment Bank vice president Mihai Tanasescu (right), former Romanian finance minister and (further acronym alert) IMF representative. Perhaps aware of the fear that those particular three letters strike in the hearts of Irish people, Mr Tanasescu went slightly off-script at the meeting to provide some reassurance.

“Ireland always delivered,” he said of his IMF experience, adding that as a country, Ireland was “always able to keep their promises”.

While some believe we would be better off if this hadn’t the case (bondholder bonfire, anybody?), Mr Tanasescu clearly thought our promise-keeping ability was wonderful.

“We’re very confident in the future of the country,” he said.

He went on to speak of a river of riches ready to flow into Ireland via the non-profit European Investment Bank, which is bursting to provide us with low-cost loans in education, banking, healthcare, transport, agri-food and, via the EIF, microfinance.

EIB funds could also be blended with other European funds, he suggested. He spoke of the crucial “catalytic” effect such investments can have.

“The EIB is open for business in Ireland and we see many opportunities for investment,” Mr Tanasescu said, adding that the bank was “working very hard” on various initiatives.

How nice, for once, to hear a three-letter merchant go easy on us. Hopefully Ajai and his pals were listening.


The CSO’s latest Quarterly National Household Survey will be released this morning. Meanwhile the Quinns are due back in the High Court once again.