Glanbia decides: the case for and against
Tomorrow, 7,500 co-operative members will vote to determine the future direction of the food group Glanbia. The vote is the first stage of a proposed process that will see Glanbia plc hive off its milk business in Ireland as part of a joint venture with its co-op shareholder.
The proposed new entity, Glanbia Ingredients Ireland, will be 60 per cent owned by the co-op and 40 per cent by the plc. It will oversee the completion of a new site at Belview in Kilkenny. The plc will then concentrate on its nutritional business, which has been the main driver of growth.
The first vote, which needs a 50 per cent majority, will involve the offloading of 3 per cent of the co-operative’s 54 per cent holding.
If passed, two more votes will be held, which will determine whether a further 10 per cent of Glanbia’s co-op share in the plc should be offloaded, 7 per cent of which will be distributed to farmers, and 3 per cent of which will be used to fund the new entity.
These votes – which will have implications for the funding of the new venture – need a 75 per cent majority.
Meetings have been taking place across the country in recent weeks between co-op members and the plc. As shareholders weigh up their options in the coming weeks regarding this extremely complex deal, the importance of the vote should not be underestimated. As it is the biggest milk processor in the country, how Glanbia proceeds as it seeks to take advantage of the opportunities afforded by the opening up of dairy markets in 2015.
Here two experts in the area outline their views on tomorrow’s vote.
John Bryan: For
This deal is fair and balanced, and in the best interests of Glanbia Co-op
The proposal to form Glanbia Ingredients Ireland (GII) is very different from what was put to farmers in 2010. I believe this deal is fair and balanced, and in the best interests of Glanbia Co-op farmer shareholders and the sector generally.
It will give shareholders a chance to realise some of the value from their long-term commitment to the co-op, which will be a benefit to farm families and the rural economy generally.
GII is not a co-op. However, it will clearly be run on co-op principles, with solid commitments on maximum profit retention that prioritise milk prices to farmers.
The IFA has a long-held view that farmer control of dairy processing is important, and this proposal will see 60 per cent of the largest processor in the country under farmer control. The GII model will also unlock the investment needed to build the facilities that are essential to cater for the planned expansion by farmers.
The co-op will still own 41 per cent of a global nutritions business, which has the capacity to return significant dividends and further capital growth into the future. While this is not a majority shareholding any longer, it is a very valuable and influential shareholding by the co-op in the plc.
Crucially for all shareholders, it will leave the co-op debt-free, with an annual dividend income of around €13 million, which can be used for all shareholders.