Glanbia gets deal across line at second time of asking

Glanbia's long-running efforts to spin out a majority stake in its dairy business to its largest shareholder, Glanbia Co-op, has finally been put to bed, proving the old maxim that if at first you don't succeed, try again.

The deal, which will see the creation of a new entity, Glanbia Ireland, was approved by Glanbia plc shareholders on Monday, paving the way for the transaction to be completed in early July.

Glanbia boss Siobhán Talbot appears to have learned from her predecessor John Maloney, who tried and failed to get a similar deal across the line in 2010.

Back then a significant number of co-op members baulked at the idea of reducing the co-op’s stake in the plc to just 10 per cent, the required dilution needed to fund the purchase of the dairy business outright.

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Under the new deal, the co-op will only have to reduce its stake in the plc to 31.5 per cent to fund the acquisition of a controlling stake in the new dairy business, which will hold brands like Avonmore, Kilmeaden and Premier.

Majority ownership

Insiders insist the arrangement is a win-win for both sides. It gives the co-op, and therefore farmers, a majority ownership of the businesses closest to them – in other words the dairy and agribusiness assets that directly affect their pay cheques.

Contrast this with the beef industry, where farmers have no influence over the price or strategy of the businesses they supply, leaving them as price-takers in an increasingly volatile market.

From the plc point of view, having the heavy-lifting processing side of the business wrapped up in joint ventures allows it focus on the higher-margin consumer trend products and the performance nutrition side of the business.

It will also bolster the company’s war chest for future acquisitions, which has been key to its recent success.

The acquisition of Optimal Nutrition and BSN has made the Kilkenny-based company the biggest global player in the performance nutrition market.

These brands helped drive annual revenue to €3.7 billion last year, more than double what it was 10 years ago, despite the global dairy slump.

Proponents say the deal allows for a more clean-cut strategic perspective from both sides.