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Tuesday 26 September 2017

Debt-free co-op key to Glanbia sale plan

Herlihy insists new entity will be a 'hard-nosed' commercial outfit

CRUNCHING THE NUMBERS: (from left) John Moloney, Glanbia group managing director, Siobhán Talbot, group finance director, and Liam Herlihy, Glanbia co-op chairman, announce the group's
full year results for the year ended January 2, 2010.
CRUNCHING THE NUMBERS: (from left) John Moloney, Glanbia group managing director, Siobhán Talbot, group finance director, and Liam Herlihy, Glanbia co-op chairman, announce the group's full year results for the year ended January 2, 2010.
Declan O'Brien

Declan O'Brien

Delivering a debt-free business will be essential to securing farmer support for the purchase of Glanbia's Irish operations, Glanbia Co-op chairman Liam Herlihy has said.

Mr Herlihy confirmed that he does not envisage the co-op taking over any of the Glanbia plc debt -- around €440m -- as part of the buyout plan.

Last week Glanbia plc confirmed that it was in talks with Glanbia Co-op regarding the possible sale of its Irish milk processing, consumer foods and agri-trading elements.

Any deal will require the backing of 75pc of the 7,250 co-op shareholders in two separate votes.

However, several Glanbia council members said it was still too early to confidently say whether the plan would get the go ahead from farmers.

The co-op aims to pay for the business by selling a proportion of its 54pc shareholding in the plc. Securing a debt-free business is key to the co-op board's business plan and will be critical in winning over farmer backing.

"The debt of the plc is nothing to do with us. We are buying the Irish businesses, brands and properties; we are not buying the debt," Mr Herlihy said.

"The co-op board is incredibly conscious that our business model must be sustainable and that any deal is done within safe financial parameters, which leave us with no core debt and low gearing."

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Mr Herlihy, who stepped aside as Glanbia plc chairman for the duration of the talks and has been replaced by John Callaghan, maintained the deal envisaged by the co-op would offer real benefits for farmers.

If the buyout plan is successful, the new business will bring the "hard-nosed" commercial attributes of the plc to the three businesses being sought by the co-op, Mr Herlihy said.

"The model we aim to put in place is one that must be sustainable, have a very clear commercial focus and provide a sound strategy for growth."

He said the new business would have to mirror European co-ops such as Danish outfit Arla Foods or Dutch giant Friesland Campina.

Mr Herlihy claimed the co-op structure offered a flexibility to deal with incre-ased volatility in world dairy markets, which the plc model lacked.

"The co-op has one set of shareholders, and only one set of objectives: to maximise farmer value," he pointed out.

Glanbia's Irish businesses had a turnover of €1bn and delivered profits of €24m last year. Describing them as "well run, well invested and well rationalised", Mr Herlihy said they had the potential to deliver operating margins of 4-5pc, or annual profits of close to €50m.

A value must be established for the businesses and an offer made by the co-op over the next six weeks. A sale price of between €200m and €280m has been suggested.

Meanwhile, Michael Horan has been appointed company financial officer by the co-op. Mr Horan was formerly the company secretary and Glanbia group financial officer. Former Glanbia finance director Geoff Meagher is the co-op's interim chief executive.

Irish Independent



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