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Thursday 15 November 2018

Kerry Co-op to look at all options after 'robust' exchanges at AGM

The Kerry Co-op board has committed to communicating with all A and B shareholders in the coming weeks to solicit their views on the future direction of the organisation.

The board move follows a heated AGM in Tralee last week which attracted a huge attendance.

Serious differences regarding the future direction of Kerry Co-op were aired at the AGM.

While Kerry Co-op board is exploring the option of reviving the co-operative as a trading entity, possibly with milk processing, a sizeable proportion of A, B and C shareholders want the society to spin-out its lucrative stake in Kerry Group Plc.

Kerry Co-op is the largest shareholder in Kerry Group Plc with a 13.7pc holding valued at €2.2bn.

In a statement to Kerry Radio following the meeting, Kerry Co-op confirmed that the board would be "communicating with all A and B shareholders seeking their views on the future strategic direction of the co-operative".

The Kerry Co-op statement accepted that there were "robust exchanges on the matters affecting shareholders" at the AGM and that the "views expressed would be taken on board by the directors".

A proportion of co-op shareholders want Kerry Co-op to sell its remaining stake in Kerry Group Plc and share the dividends among the society's 13,269 members. This would result in an average pay-out of around €165,000 per co-op shareholder.

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However, the spin out option is opposed by the leadership of Kerry Co-op board, who argue that such a move may not benefit from favourable tax exemptions that applied in the past.

The 701 clause in the Finance Act essentially enabled co-op members to receive plc shares in a spin-out situation without incurring an immediate tax liability. Tax on the share transfer was delayed.

This concession has been the subject of a Revenue review in recent years. But the implications of this review for future spin-outs are a matter of contention between the Kerry Co-op board leadership and dissenting shareholders.

In its statement to Kerry Radio, Kerry Co-op stated that advice received from their tax advisers, Deloitte, on the share spin-out issue was presented to shareholders.

A draft letter to shareholders from Kerry Co-op, which was due to be sent out to shareholders after the AGM, maintained that the organisation needed to "evolve into a trading agricultural co-operative with milk processing facilities".

The letter, which was seen by the Farming Independent, follows a study by the co-op's strategy committee.

Possible actions identified included the acquisition of the Kerry Agribusiness arm of Kerry Group - the stores network and feed mills - if such a venture made "commercial sense".

In terms of milk processing, it recommended that "all options to work with a co-operative or milk processing company through a merger/joint venture or other suitable structures" should be explored.

However, these moves are opposed by a sizeable cohort of shareholders. These shareholders maintain the Kerry Co-op is using the €2.2bn shareholding in Kerry Group Plc to establish a trading venture in what they claimed were "low-margin businesses".

Pressure grows for for spin-out of €2.2bn stake

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