Kerry Co-op shareholders stage protest vote over possible joint venture deal with plc

Kerry Co-op shareholders have staged a mini revolt against the group’s board over the potential purchase of the listed company’s legacy milk processing business.

The co-op, Kerry Group’s largest shareholder, has been in discussions with the company about a possible transaction that would see Kerry’s traditional dairy operation, which includes popular brands such as Dairygold, Charleville and Kerry Low-Low spread, spun out into a separate joint venture in which the co-op would take a 60 per cent stake.

Co-op shareholders are, however, uneasy about how the co-op will finance its stake in the joint venture and want the conversion rate of their shares in the co-op to be locked in at a rate of one to 5.9 plc shares.

This would effectively ringfence about 94 per cent of the co-op’s €2 billion value, leaving it with €180 million to finance any potential deal with the company.

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The co-op had intended to put a resolution around the conversion rate of co-op shares to shareholders at the co-op’s annual general meeting (agm) in Killarney on Tuesday but pulled it after legal advice.

In protest, shareholders yesterday voted down two technical and unrelated resolutions on advisory groups and voting rights. A separate vote in relation to the “locking-in rule” was passed but as it was a show-of-hands vote, it was not binding.

Kerry Group suspended talks with the co-op last year about the possible sale of its dairy business amid reports that both sides could not agree a price but they were revived several months ago. Kerry Group opened its books to the co-op in recent weeks for due diligence, after the latter placed an indicative bid on a controlling stake that valued the entire venture at €800 million.

Agribusiness consultant Ciaran Dolan said the deal, first and foremost, had to make business sense for the co-op. “Is it the first stage of taking back full control of milk processing? And if all of that makes sense from a business point of view, the other bit that has to be resolved is how is it to be funded,” he said.

“Is it to be funded exclusively or predominantly from the existing funds of the shareholders or is it going to be funded by dairy farmers and by borrowings? These are issues that need to be addressed collectively by the board and the co-op shareholders,” Mr Dolan said.