Dairygold shares to be traded publicly

Shares in part of co-op Dairygold's business are likely to be traded publicly under the terms of a restructuring plan proposed by its management.

The Cork co-op's 8,000 members have already approved the outline of a plan under which three parts of its business, consumer foods, its 4Home DIY stores and its property portfolio will be placed in a new subsidiary provisionally called Red Box.

Red Box will be incorporated as a limited company, with the co-op itself retaining a portion of the equity, possibly 25 per cent, and the balance will be issued to the members in proportion to the number of Dairygold shares which they hold.

Ultimately, shareholders in Red Box will be able to trade the shares they hold in the company on the "grey" market (the market for publicly available equities in plcs that are not listed on any stock exchange) in the same way as units in companies like NTR are bought and sold.

A spokesman told The Irish Times last night that the new company would not initially be a suitable candidate for a stock exchange flotation. However, he pointed out that if that changed in the medium term, then a flotation could happen if the shareholders approved.

Dairygold has been working on developing the new structure for several months in conjunction with Goodbody Corporate Finance. It is set to publish a prospectus for the new business within the next few weeks and hopes to get final approval ahead of its annual general meeting in May. Chief executive Jerry Henchy and its board believe that this will give the co-op greater flexibility to raise the €400 million to €500 million it needs to develop the businesses.

The consumer foods division is likely to need investment for research, development and marketing to for new products.

The plans it has for parts of its property holdings will also require investment. It is proposing to build commercial, retail and residential units on a site close to its base in Mallow Co Cork. 4Home, a chain of DIY stores which Dairygold developed out of its traditional co-op outlets, will also need investment to expand further.

Dairygold's milk processing and farm services businesses will remain in a new unit provisionally called Green Box, which will stay in the co-op's control.