June 12th last is a date many farmers in north Cork, Limerick and Clare will long remember: it is the day Kerry Group plc made its first offer to take over Golden Vale plc.
Many might not have understood the ramifications of that first offer, but as the element of surprise waned and Kerry seemed set to up the ante, the farmers became worried. Essentially, Kerry was going to gobble up its neighbour.
The takeover would represent only between 10 and 15 per cent of Kerry's capitalisation, but would be its biggest recent acquisition in Ireland.
It could have some confidence of success. Institutions or large shareholders held more than two-thirds of Golden Vale shares. The biggest single shareholder, Mr Dermot Desmond, with 12.5 per cent, would sell if the price was right. Milk suppliers to Golden Vale and farmers' extended families held only about one-third of the shares; this was because many farmers, after the former co-operative went public, cashed in.
When, on August 11th, Kerry made an offer of €245 million (£193 million), it was clear that many of the larger shareholders would accept. They had no reason not to: Golden Vale shares, which had been trading poorly a few months before, now rose to €1.49. However, the farmer-shareholders were another matter.
The offer was one Kerry share for every 10 Golden Vale shares and 13 cents per share in cash, as well as interim and special dividends worth another 4.26 cents per share. Alternatively, it offered €1.50 per share, as well as the 4.26 cents in interim and special dividends. Golden Vale suppliers were to be given three places on the board of Kerry Group plc.
That Kerry didn't succeed in getting the 80 per cent required for an unconditional takeover by its first deadline surprised even the farmers. And when it did pass the 80 per cent, achieving 82.5 per cent last Friday, some people were still asking why the acceptance had not been higher. Clearly, the remaining 17.5 per cent either were small shareholders who did not care about the outcome or Golden Vale farmers.
In between the first offer and last week, it appeared as if a "hostile corporate bid" scenario was developing. The board of Golden Vale plc rejected the first offer of €1.37 a share. Some farmers threatened not to transfer their milk supplies to Kerry unless certain conditions were met.
That threat had a hollow ring, however. To transfer this volume of milk to another processor would be almost impossible, given that there is little surplus capacity in the industry. And it emerged that Kerry's chief executive, Mr Denis Brosnan, had what was described as "a working relationship" with two co-operatives which might have taken some of the milk, the large Dairygold and the smaller Tipperary co-operatives.
Then 11 of the 17 members of the board of Golden Vale plc signed a letter expressing no confidence in their chief executive, Mr Jim Murphy. After legal advice that they would be personally liable to shareholders if the Golden Vale share price dropped as a result, the letter was withdrawn.
Mr Brosnan embarked on a charm offensive in the Golden Vale area. Over a couple of weeks, he held five meetings with over 2,000 Golden Vale suppliers.
He assured them about some of their concerns. He told them Charleville (where Golden Vale's milk processing is located) would not be turned into a "ghost town".
The two main farm organisations, the Irish Farmers' Association and the Irish Creamery Milk Suppliers' Association, came down firmly in favour of Kerry.
The takeover is expected to give Kerry efficiencies and economies of scale. Savings of between 6-7p a gallon on milk assembly and processing are expected, as well as rationalisation, which could cost some jobs.
An e.g.m. of Kerry Group plc will approve the takeover tomorrow and, soon, Golden Vale Foods Products Co-operative will be wound up.
What Kerry intends to do with the additional 120 million gallons it will have is unclear, but it hardly will continue to produce the traditional dairy products Golden Vale has been making. Nor does anybody know what Kerry intends to do about the 10 per cent shareholding in the Irish Dairy Board, owners of the Kerrygold brand, which it will inherit from Golden Vale. Since the early 1990s, Kerry has not traded any volume of product with the IDB and has refused to pay the levy of 0.5p a gallon paid by all the other dairy processors.
It's a done deal as far as Golden Vale is concerned and it has left a number of the farmer directors of the plc with a sour taste in their mouths and a sense that, had they been cannier, and acted sooner, they might have made an alliance with a co-operative such as Dairygold. For Mr Brosnan, it could be seen as the crowning glory of his brilliant reign in Kerry - after all, he started his career in the dairy industry working for Golden Vale.
