Talks on takeover of Glanbia dairy arm 'progressing well'
THE 7,000 farmers who make up the Glanbia co-op have been told that talks on their group's purchase of Glanbia's ailing dairy business are "progressing well", with firm proposals expected to be ready for a vote in May.
The farmers received the news in a letter from Glanbia co-op chairman Liam Herlihy, dated March 31. The co-op, which owns 55pc of Glanbia plc, announced it was in talks to buy out the plc's dairy business three weeks ago.
The letter also confirms that while the co-op will finance the acquisition "through a significant reduction in our shareholding of Glanbia plc", the farmers group "will continue to retain a strategic investment".
More than 30pc of the plc is expected to come on to the market if the deal goes through. Institutional investors are ready to buy the stock, assuming it comes at a significant discount.
Mr Herlihy's letter describes the co-op's acquisition of the Irish dairy businesses as a "defining opportunity for members" who will be the sole beneficiaries of the dairy businesses future profits.
The business lost money last year but Mr Herlihy says pre-tax profits of €50.3m in 2008 reflect a "more normal" trading period.
Mr Herlihy also points to the potential for the "growth in milk production", with the easing of milk quotas. However, no mention is made of the multi-million infrastructure investment that would need to be made if Ireland significantly increases its milk output.
The letter also makes no mention of possible valuations of the deal, which analysts say could generate between €255m and €280m for the plc.
Mr Herlihy stresses that Glanbia co-op's board is "committed to an extensive communications programme" with members on the deal ahead of two special general meetings in May when the farmers will vote.
"The benefits of this proposal arise in having two stand-alone businesses that have the freedom to grow and develop in their own right," Mr Herlihy says.
"This is not guaranteed and it will be down to the board and managements of each enterprise to drive them forward and make this happen.
"Ultimately it will be you, the members of Glanbia co-op, who will decide on this substantive issue."