Claims and counter claims over Kerry Co-op cash for shares initiative

A second placing under the share redemption scheme will take place in November 2019.
A second placing under the share redemption scheme will take place in November 2019.

Dan Danaher

Claims and counter claims continue about the merits of Kerry Co-op Creameries Share Redemption Scheme continue this week ahead of a crucial vote in the Brandon Hotel, Tralee on June 19.

Kerry Co Op has 13,500 shareholders and owns an estimated €2.5bn worth of shares in Kerry Group PLC.

The co-op has described the level of “scare mongering and confusion” by those opposed to the scheme as “unfortunate and irresponsible”.

It has urged members to seek professional financial and taxation advice before they consider this “cash for shares” initiative.

Their plea comes as opponents and supporters of the scheme engage in a battle to win the hearts and minds of farmers ahead of this crucial vote.

The co-op board need a two thirds vote in favour of this scheme to ensure it comes into operation.

Kerry Co-op chairman, Mundy Hayes, said this scheme represents the best current option to releasing equity to its members.

In a statement issued to the Clare Champion, Mr Hayes explained the scheme is a voluntary initiative and is the direct result of calls in recent years from our members to address the ongoing liquidity issues in their shareholdings and to remove the restriction on the requirement of the co-op to hold a 10% shareholding in Kerry Group plc.

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“It is also the first and best option being considered by the co-op as we look at a range of measures to enable our members to obtain the true value of their equity.

“As the scheme is deemed a distribution by revenue, it is therefore subject to income tax as opposed to Capital Gains Tax and for that reason, we have been clear at all times that it will not suit all members, however, it also represents a real opportunity for a considerable amount of members.

“To date, we have received considerable interest in the scheme, which is encouraging and we are quietly confident it will be approved at our forthcoming AGM,” he said.

He criticised suggestions that liquidation is the best option as “scaremongering”.

Howver, Listowel dairy farmer, Dave Scannell has urged all Clare, Limerick and Kerry shareholders to oppose this scheme and “stop farmers from being thrown to the wolves”.

He claimed that if he cashed in shares under this scheme, he would be paying more than 50% tax and would be doubly taxed on any inherited shares.

“As a shareholder myself and the grandson of one of the founding shareholders of Kerry Co Op, I am hoping that 90% of shareholders will vote no to this scheme to clearly show the board of directors the displeasure we have at the direction they have taken our Co Op as of late.

“I believe that until a new scheme is developed where shareholders would only have to pay capital gains tax instead of income tax on their shares that shareholders won’t be appeased.

“If we only had to pay capital gains tax on our shares most of the Clare farmers would end up having no tax at all to pay because they would be able to use the loss of their milk quota to offset their tax bill.

“The last time our Kerry Co Op board invested money on our behalf was when they bought shares in One51 back in 2007. The less said about that investment the better.

“Furthermore in 2018 Kerry Co Op set a precedent by giving out one share each to every milk supplier to Kerry Group who doesn’t already have a co op shareholding. Over the next 10 to 15 years, these new A shareholders with one share each will continue to grow, eventually they will dominate the board and will have all the sway with the voting rights,” he said.

“If this scheme goes ahead 96.5% of Kerry Co Op’s holding in Kerry Group will be “ringfenced” for the scheme. With this scheme 3.5% of the shareholders holding in Kerry Co Op will be set aside to be used by the board to make Kerry Co Op an active trading Co Op again.

“The 3.5% that will be set aside will be worth €87.5mn. The remaining shares will be subject to income tax, PRSI, USC of up to 55%.

“Kerry Co Op currently has a 13.7% holding in Kerry Group PLC, when this drops down below 5% Kerry Co Op will have to pay 33% CGT on any shares they sell, then the shareholder will have to pay over 50% income tax on the shares also, no allowances will be made for the CGT already paid so everyone will be facing double taxation,” he claimed.

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