Glanbia sale to generate €280m
Geoff Meagher tipped to head Irish division after sell-off
Published 11/03/2010 | 05:00
GLANBIA's sale of its troubled Irish business could be completed as early as June and could generate proceeds of between €255m and €280m, analysts said yesterday.
The commentary came after the dairy group yesterday revealed it was in talks to sell its substantial Irish businesses to the Glanbia co-op, which owns almost 55pc of the plc.
It is understood that Geoff Meagher, who stepped down as Glanbia's deputy managing director last summer, has already been teed up to head the Irish business once it passes over to the co-op.
News of the possible deal drove Glanbia's shares up 5.4pc at the opening bell, marking the group's biggest same-day gain in more than two months, as investors welcomed the prospect of eliminating the plc's most challenging division.
The shares began to slide almost immediately, however, after analysts were told any deal would have to involve either a cash or debt contribution to Glanbia plc.
To raise that cash or take on that debt, the co-op would have to sell off a large chunk of its plc shares, potentially pushing the plc's share price down.
The markets responded to that prospect by driving the shares from their €2.72 open to a low of €2.45 at noon, before a gradual recovery saw it end the day at €2.53.
Despite the mixed market response, Glanbia boss John Moloney yesterday insisted the deal would be a sound strategic move for both the plc and the co-op, an argument that was also advanced by analysts covering the stock.
The Irish business ran at ~an operating margin of just 2.3pc last year, against operating margins of 11p.4pc at Glanbia's US Cheese and Global Nutritionals business, which would become the entire Glanbia group if the deal goes through.
Mr Moloney also pointed to the potential for the group to use any cash from the sale of the Irish business to "deleverage the plc" and "increase the financial flexibility of the plc".
The Glanbia boss refused to be drawn on valuations of the Irish business, but Bloxham's Joe Gill suggested a figure of €255m based on a multiple of six times earnings, where NCB analyst Paul Meade suggested a figure of closer to €280m.
Mr Moloney said that the proceeds from the sale of the Irish division could be used to fund acquisitions overseas, with the company eyeing up a "pipeline" of targets with turnovers in the $120m to $150m range.
He added that Glanbia's priority would be to work around "global nutrition", hinting at opportunities in the weight loss and anti-ageing sphere.
Glanbia's existing US Cheese and Global Nutritions business includes US-based Optimum Nutrition, whose portfolio includes health and sports products, and joint venture effort Southwest Cheese, which is one of the US's largest producers of cheese blocks.
The US Cheese and Global Nutritions businesses generated revenues of €792m and operating profits of €90m last year, while Dairy Ireland generated revenues of just over €1bn and operating profits of €24m, according to yesterday's full-year results.
Glanbia has carried out extensive restructuring in Dairy Ireland over the last year, with more than 200 jobs cut in 2009, largely in that division.
The group yesterday confirmed another 230 jobs were to go in 2010, again largely in Dairy Ireland.
Mr Moloney stressed that the restructuring of Dairy Ireland would continue despite the division's possible sale, adding that if the co-op deal didn't go through Glanbia plc would not go looking for another suitor.