Kerry has 80% Golden Vale backing for deal

Kerry Group is understood to have achieved the 80 per cent of shareholder votes necessary for the unconditional takeover of Golden Vale plc.

However, an official announcement will not be made until Monday morning, when the Stock Exchange opens for business.

The second closing date for voting was yesterday and, although votes were said to have been slow to come in during the week, the required level was achieved before the afternoon deadline.

The &€8364;245 million (£193 million) offer for Golden Vale comprises an offer of one of its shares for every 10 Golden Vale shares, 13 cents per share in cash plus interim and special dividends worth another 4.26 cents per share. There also is a straight cash alternative of &€8364;1.50 per Golden Vale share plus the 4.26 cents in interim and special dividends.

The takeover gives the enlarged group a milk pool of 230 million gallons and must inevitably lead to some rationalisation of milk processing in the region. It is estimated that Kerry Group could make savings of some 6-7p per gallon in processing and assembly efficiencies.

It also makes sense for the enlarged group's food processing interests in the Republic and Northern Ireland - Kerry's and Golden Vale's non-dairy businesses in areas such as food ingredients and consumer foods complement each other in many cases.

What fascinates many industry commentators is what Kerry plans to do with the 120 million-plus gallons of milk it will get from Golden Vale suppliers. In recent years, Kerry had made no move to increase intake of raw milk to its Listowel processing plant. There has been speculation that, instead of more traditional uses, Kerry will divert it into milk proteins, casein and caseinates.

Kerry's move to acquire Golden Vale in June surprised the food industry - around 75 per cent of Kerry's interests are outside Ireland at this stage. The acquisition is regarded as a small one for Kerry, representing between 10 and 15 per cent of its capitalisation.

While some Golden Vale suppliers were unenthusiastic about the takeover, it eventually got the blessing of the farm organisations and the Irish Co-operative Organisation Society, the umbrella body for co-operatives. Kerry's managing director, Mr Denis Brosnan, held five meetings with more than 2,000 Golden Vale milk suppliers after a second formal offer was made to reassure them about concerns on price, independent milk testing and surplus quota.

By the first deadline on August 2nd, Kerry had received 72.4 per cent of the the shares. A further 3.5 per cent were incomplete and some 1.5 per cent delivered through the electronic shareholding register also required written acceptances. At that time, a Kerry spokesman said the group was confident of getting the 80 per cent this week. With that 80 per cent, Kerry can compulsorily acquire the remaining shareholding in the Charleville, Co Cork-based firm.

Britain's Office of Fair Trading yesterday invited comments on the acquisition. This is standard practice following Kerry's application to the office for regulatory approval. A similar application has been made to the Monopolies and Mergers Commission here.