Farm Ireland

Thursday 14 December 2017

Could Glanbia be bought out by Japanese food firm?

A merger with or acquisition of Glanbia might not be straightforward.
A merger with or acquisition of Glanbia might not be straightforward.
Margaret Donnelly

Margaret Donnelly

While Glanbia Plc announced a seventh year of double digit growth and details of plans for the co-op to buy a 60pc share of Dairy Ireland, the rumour mill has begun to turn with talk of a possible buy out.

Exane BNP Paribas analysts predicted recently that Japanese flavourings company Ajinomoto is on the look out for European acquisitions. However, the search zone was believed to be centered around continental European firms. That could change in response to Glanbia's announcement this week to restructure.

With a budget in the region of US$2bn (€1.9bn) Ajinomoto, which specialises in artificial sweeteners, spent a considerable amount of money in recent times expanding its US, African and Middle East presence through food companies.

It seems stagnant markets in Japan have forced Ajinomoto to look at the wider global food market through acquisitions to grow its empire.

However, a merger with or acquisition of Glanbia might not be so straightforward. Glanbia co-op currently owns 36.5pc of Glanbia Plc and while the proposed share spin off would see the co-op’s share of the Plc reduce to 31.5pc, it’s still a sizeable amount.

Laura Devoy, Investment Manager with Goodbody Stockbrokers, told Newstalk radio today that while Glanbia’s results were good there was more to its 7pc share rise. The proposed joint venture where the co-op would buy 60pc of Dairy Ireland allows the Plc to focus more on its core business – nutritional powders.

She said that when investors met Glanbia management they said to not underestimate the presence of the farmer shareholding in Glanbia. “The co-op still holds a big chuck of shares…so for any potential suitor they will have to navigate that and…that might not be as straightforward.”

But she said it does highlight that the sector has rebounded and the theme of mergers and acquisitions has come into the sector in recent months.

Also Read

Ajinomoto has plans to become one of the world's top food companies in the coming years, but it has been negatively impacted by the purchase of an animal feed amino acid business - a mistake it won't want to repeat and a long, drawn out negotiation process to acquire part or all of Glanbia might prove too troublesome.

Online Editors