Share spin-out call expectd at AGM
Published 14/06/2016 | 02:30
Pressure is mounting ahead of the Kerry Co-op AGM where dairy farmers hit by low milk prices and 'dry' shareholders are expected to call for measures to allow them to convert co-op shares into valuable Kerry Group shares.
It comes as mediation has broken down between the Kerry Co-op and the Kerry Group plc over the ongoing row on the 'thirteenth payment'.
Kerry's 3,300 farmer suppliers feel a strong top-up is necessary to fulfil a promise they stress was given to pay "the leading milk price".
A source close to the co-op board confirmed that the mediation had been unsuccessful and an independent arbitrator was now to be agreed by both parties to consider the Kerry milk contract.
A strong presence of farmers and 'dry' shareholders, who hold Kerry Co-op shares but are not supplying milk, are expected to attend the co-op's upcoming AGM on June 21.
It will be the first AGM since Kerry Group chief Stan McCarthy stepped down from his chief executive position with the founding co-op. In addition to the 'thirteenth payment', shareholders are expected to question from the floor why they cannot convert co-op shares into Kerry Group plc shares.
Farmer shareholders are estimated to hold 30pc of the shares in the plc after a number of spin-outs, while the co-op holds a separate 13.7pc stake of around 24 million shares valued at €1.9bn.
The last time farmers were allowed to convert, each co-op share was valued at 6.2 plc shares, and with the plc share price now hovering close to €80, demand is growing.
Over 64.5 million plc shares have been issued to farmers over seven spin-outs since 1993, which would be valued at around €5bn based on the recent share price.
One milk supplier and co-op shareholder from Listowel said farmers were eager to be permitted to convert co-op shares into plc shares.
"People feel very strongly about it and are really getting cross on it. A lot of frustration has built up," said the milk supplier.
"It should be released to people whose backs are to the wall and the wolf is at the door. There is no reason to stop people converting over shares."
For a co-op shareholder with 500 shares, it is worth roughly 3,100 plc shares, which works out at over €244,000 based on the share price over the €79 mark.
However, while co-op shares maybe worth nearly €480-500 with the last conversion rate, they have been fetching less on the 'grey' market. Some farmers are understood to have been parting with them for €200 to €300 to try and release cash on farms.
Kevin Galvin, the ICMSA Kerry chair, said the elected members of the Kerry Co-op board have always represented farmers' interests and "we'll trust them to do the same on the further share conversion".
"There are guys out there in genuine financial stress whose interests amount to €200,000, €300,000, €400,000 or maybe even a million and some of them are looking for the conversion," he said.
"But in the longer term, our position is we want there to be an increase in Kerry's milk price as that would help our members an awful lot more."