Inside The World Of Business
Glanbia's Irish dairy deal begins to turn a little sour
THE VAUNTED win-win deal under which Glanbia is to offload its Irish dairy processing business to the eponymous dairy co-op is beginning to look more like a traditional win-lose deal.
The 8 per cent jump in Glanbia’s share price that followed the announcement gives some indication as to who the winner might be.
In the normal way, the shares of a company that is about to see some 35 per cent of its equity placed in the market – particularly the current market – would be expected to fall.
However, when the cash that will be raised is to be handed back to the business in exchange for the least attractive parts of its portfolio of processing assets, then things start to look a little different.
All going well, the plc will emerge from the deal with less debt, a much more favourable mix of business and free from the “dead hand” of its 55 per cent shareholder, Glanbia Co-op.
Not so fast.
The waning yesterday of the enthusiasm that propelled Glanbia’s shares on Tuesday is being seen as the product of a dawning realisation that if the deal is seen to be too favourable to the plc, it will not fly with the members of the co-op who must vote it through.
The co-op’s plan to divvy up half of its remaining 20 per cent stake among its members is meant to act as a counterweight to the possibility that the co-op is paying too much or that the deal will be shown in time to be ill-conceived.
In theory, what they lose on the swings they gain on the roundabouts. Win-win once again?
Well, maybe. The share transfer certainly goes some way to addressing the overpayment issue, but it does not reassure co-op members such as grain farmers, who might question the wisdom of the deal, which seems designed around the short-term needs of diary farmers.
But the co-op’s complicated voting structure, which attempts to match the voting power of members to the extent of their business dealings with the co-op, means the milk suppliers look likely to win the day.
Back to win-lose.
Multiple sclerosis drug vital to Elan's health
ELAN SPENT a good portion of its results presentation talking up the EDT drug technology unit it is considering splitting off into a separate listed business, but Elan chief executive Kelly Martin has stressed that Tysabri remains its primary focus for 2010.
The multiple sclerosis drug, developed with US partner Biogen Idec, is a blockbuster but, for all its proven efficacy, recurring incidents of a potentially fatal brain disease – progressive multifocal leukoencephalopathy (PML) – have undermined efforts to maximise patient numbers on the drug.
A sharp rise in PML numbers last year saw the introduction of even starker warnings on the label, a factor blamed for disappointing sales figures for Tysabri announced yesterday for the first quarter. Only 130 patients a week were added in January and February, although this rose to 190 in March. Company president Carlos Paya said yesterday he thought the impact of the new label had now been absorbed by patients and their doctors.
The companies are also starting a new series of clinical trials to see if they can more accurately determine those patients more vulnerable to PML. Dr Paya outlined plans for two Stratify trials, for which enrolment is under way. They will try to confirm whether only people positive for JC virus antibodies run a risk of PML.
Data already in the possession of the companies relating to 13 of the 46 cases of PML to date show that all have been from people found to have the JC virus antibody. While clearly stating that such a finding had yet to be proved by the trials, Dr Paya noted that, with roughly 50 per cent of the population JCV positive, you would not have expected all the cases to come from that cohort unless there was a connection.
Much work remains to be done – and given the drug’s history it may be that some medical practitioners will always be wary of Tysabri – but it is still pivotal to Elan’s success. The company hopes to have initial trial data as early as midway through this year.
Doom and gloom so yesterday
ARE WE being too pessimistic about the economy?
Dan McLaughlin of Bank of Ireland seems to think so with his prediction earlier this week that the economy might actually register growth this year. It puts him ahead of the pack, with the consensus being that the recovery predicted for the second half of the year will not compensate for further decline in the first six months.
Dr McLaughlin is not entirely alone in his optimism. Boutique UK economics consultancy Cebr has begun coverage of the Irish economy and is also of the view that we may be overdoing it on the doom and gloom.
Cebr believes that a weakening of the euro – possibly to dollar parity – as a result on internal contradictions and internal devaluation will drive the export-led recovery that we are longing for.
On a slightly less analytical note, Cebr managing director Douglas McWilliams opines that they are “told by those who have carried out rather more systematic research than us that some hangovers are really painful. It looks as though the Irish hangover falls into that category, but those who have researched hangovers on our behalf tell us that even the worst hangovers come to an end after a maximum period of 48 hours.
“In a similar economic vein, we can observe that the Irish economic hangover will last for a finite period . . . and that the patient will eventually recover.”
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TODAY:
Much of today’s focus will fall on the Public Accounts Committee, which is due to hear from John Corrigan, chief executive of the National Treasury Management Agency. EirGrid results are also due.
