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Tuesday 27 June 2017

Kerry bids €22m to buy up Newmarket

Offer for co-op divides opinion

BRIDGE TOO FAR? Some Newmarket suppliers argue that a Kerry buyout will reduce competition and hit returns for milk, but others are keen on the deal.
BRIDGE TOO FAR? Some Newmarket suppliers argue that a Kerry buyout will reduce competition and hit returns for milk, but others are keen on the deal.
Caitriona Murphy

Caitriona Murphy

Kerry Group PLC has made an offer in the region of €22m for Newmarket Co-Op.

It is understood the offer was presented to the 25-person Newmarket board last week.

It is believed that a valuation of €7-8m was placed on the co-op's stock and the remaining €15-16m relates to nominal valuations on the co-op's investments, as well as the value of shares in the co-op.

No vote was taken on the offer and it is believed that negotiations will continue in the coming weeks.

The unconfirmed bid is the first concrete approach made by Kerry to the Cork-based co-op and comes against a backdrop of divided opinion among shareholders.

Arguments

Some Newmarket milk suppliers are adamant they will try to deny any bid from Kerry Group to buy out their co-op.

Loss of competition, lower milk price and higher capital costs are the arguments put forward by those who oppose the potential takeover by the neighbouring PLC.

If Newmarket was to be bought by Kerry, some milk suppliers fear that, with less competition in the region, they would be forced to take a lower milk price.

"Kerry paid the second lowest price in the milk league for November/December," said local IFA man Michael Murphy.

"Newmarket paid 24c/l plus VAT, but Kerry paid 22.81c/l."

He added that suppliers would also lose out when bonuses were compared, with Newmarket paying a bonus of 3c/ga and Kerry offering a preference share per 1,000ga.

"The Newmarket bonus is worth €30 per cow, compared to the Kerry shares at €21-22 per cow," he said.

"I am completely opposed to it as a dairy farmer and as a board member."

Mr Murphy argued that if Newmarket agreed to a deal with Kerry, others such as Newtownsandes, Limerick Milk Producers and Boherbue would be at risk in the future.

"Our future in Kerry would be decided by pension-fund managers and institutional investors, instead of farmers," Mr Murphy argued.

The IFA man predicted that Kerry would simply dismantle the Newmarket plant and move it to Charleville in a few years.

However, not all milk suppliers are against the move.

Some maintain that milk price difference between Kerry and Newmarket, when assessed on the KPMG milk league over a five-year period, is much smaller when the equivalent shares are taken into account.

"There is an awful lot of misinformation around," said one farmer.

"My biggest fear is that you'll see neighbours falling out with each other, and that would be a real shame."

He pointed out that Newmarket's dry shareholders, who are in the majority, were all milk producers at some stage.

Several suppliers were also anxious to prevent a 'them versus us' mentality developing between dry shareholders and milk suppliers.

While active milk suppliers are adamant that they could not be railroaded into a deal, between Kerry and Newmarket, this is not certain.

Deal

The Newmarket Co-op share register is made up of around 80pc dry shareholders, while just 20pc are still working dairy farmers.

Newmarket chief executive Michael Cronin refused to comment on a possible deal, other than to confirm that there was a longstanding relationship between the two Munster milk processors.

"We are always looking at ways to develop opportunities for the co-op," Mr Cronin said.

A Kerry spokesman also refused to confirm any deal. However, as one industry source put it: "The ball's in now and the game is on."

Irish Independent



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