Kerry Group still keeps lion's share of stock in the Kingdom
CURRENT ACCOUNT: A good number of Kerry Co-op members must have choked on their cornflakes last Monday when they read that the co-op is going to divvy up 6.4 million Kerry Group shares to the co-op members and that those shares are worth an average of €160,000 for every one of the 10,500 members of the co-op.
The report on the share distribution was perfectly accurate. The only problem was that there was a minor miscalculation in the valuation put on the shares. Yes, they are worth about €100 million. But no, they're not worth €160,000 a head, more like €10,000.
That said, the latest spin-out of plc shares by the co-op illustrates the extraordinary paper wealth that has been built up in the Kingdom as a result of the growth of the Kerry Group. The co-op's stake in the plc has fallen to just over 31 per cent but that stake is worth €860 million, or an average of €82,000 for every co-op member.
It has been estimated that another 20 per cent of the plc shares are held within the county and that these are worth about €550 million. That means that almost €1.5 billion worth of Kerry Group shares are held either by Kerry Co-op or a tightly-knit group of local shareholders, mainly milk suppliers.
And that paper wealth is not necessarily spread equally across the county. Distribution of plc shares by the co-op is directly linked to the volume of milk each farmer supplies to the group. So it can be taken as read that the larger farmers in the north of the county own lots more plc shares than some of the 40-acre men in the far west.
There are more than a few paper millionaires driving around in tractors in north Kerry.
Even though 18 per cent of the plc shares have been distributed to co-op members in two tranches in the past 10 years, the vast bulk of those shares have been retained - much to the chagrin of institutional shareholders anxious to get more Kerry paper into their portfolios. That loyalty has paid a very good return - the 21 million plc shares distributed to co-op shareholders in 1996 have almost doubled in value.
But that loyalty presents its own problems as a free float of 50 per cent (when long-term local shareholdings are taken into account) is a barrier when it comes to marketing Kerry shares to overseas investors, especially the big North American investment houses that want to be able to buy shares in units of millions.
That said, the Canadian investment group Trimark has been able to build up a 4 per cent stake in Kerry, more than any Irish institutional investor with the exception of BIAM, AIBIM and Irish Life.
Some in the market believe that the very fact that Kerry is a major player in the global food ingredients industry - otherwise dominated by American companies - warrants a presence on the American stock market. But that is unlikely to happen while Kerry has the existing shareholder base and the consequent poor liquidity in the shares.
Kerry has come an awful long way with its current shareholder base. But to take the next giant step and leapfrog over the likes of IFF and McCormick will take an acquisition that Kerry is unlikely to be able to finance by debt alone.
That would be the opportunity where Kerry could broaden its shareholder base by placing shares with new investors.