OVER 1,800 shareholders packed into the Mount Brandon Hotel in Tralee yesterday to vote on whether Kerry Co-op should reduce its stake in Kerry Group from 52 to 39 per cent.
The special general meeting, the first of two required, voted by 85.5 per cent to 14.5 per cent to approve the reduction. The meeting lasted for over four hours. Under the rules, a 75 per cent approval by shareholders was required. The next meeting will be held on July 29th, in two weeks time.
The move, if given final approval, will see 6,000 shareholders receive plc shares worth over £130 million. It represents an average of £22,000 per shareholder.
A Kerry Group spokesman said around 14 people addressed the meeting. Mr Denis Brosnan, Kerry Co-op's chief executive and Kerry Group managing director, addressed the meeting for an hour to explain what the move would mean for shareholders. If given final approval, the arrangement will mean that the co-op's share holding in Kerry Group can eventually be diluted to 20 per cent.
Yesterday's meeting, which was said to be the largest in the co-ops history, saw 1,019 vote for the resolution with 199 voting against. The discrepancy in the number of people there and the number of votes cast occurred because some people were joint shareholders and others were loan stock holders.
The voting was held by secret ballot.
As part of the deal, Kerry Coop has been granted an option to buy Kerry Group plc's agri business division between the years 2001 and 2020. Approval was given by the plc at an e.g.m. after the special meeting.
The option can also be exercised if the co-op share holding in the plc falls to 20 per cent or less. It can also be exercised if Kerry Group sells a material part of the agri business division.
Under the terms of the deal, the price paid will be determined by the open market value of Kerry agri business at the time of the purchase. However, it will not exceed 25 per cent of the group's net assets or its market capitalisation.
Kerry's agri business division accounted for 16 per cent of the company's overall turnover 10 years ago, but currently accounts for just less than 5 per cent of sales and 3 per cent of operating profit. It is currently estimated to be worth £15-£20 million.
The division comprises the milk supply and assembly business, creameries, stores, depots, a cattle breeding station, as well as animal feed and pig breeding and fattening units. Last year, its sales were almost £58 million, yielding over £2 million profits.
Other co-ops have agreed to similar moves, including the Irish Agricultural Wholesale Society co-operative (IAWS). Last month, members agreed to reduce their stake in the publicly quoted agri business group by 10 per cent. The co- op's stake is now 44 per cent.
The members of the co-operative arc other co-operatives, including Kerry, Avonmore, Waterford and Dairygold.
As in the Kerry case, the transfer had to be approved by two separate general meetings. Each shareholder was entitled to one vote, regardless of the size of its share holding.
Kerry's shares traded at 610p yesterday, having closed at 625p on Friday.
Analysts do not believe that the Kerry deal, if approved, will lead to a flood of Kerry stock on the market. Capital gains tax of 40 per cent is cited as a factor which will prevent significant selling of the shares.
Even if the shareholders do sell, the institutions which currently hold about 38 per cent of Kerry shares, will compete aggressively for whatever becomes available, according to market analysts.
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