Farm Ireland

Tuesday 12 December 2017

Majority takeover support hangs in balance

Declan O'Brien

Declan O'Brien

Securing 75pc farmer backing for the Glanbia Co-op buy-back plan will be a real challenge for the proposal's supporters.

Two well-known Glanbia council members, who did not wish to be named, claimed the likelihood of securing the required level of support was 50-50 at best.

With close to 3,000 non-dairy co-op members among the 7,300 co-op shareholders, the package put on the table will need to be commercially attractive and cannot focus solely on the needs of dairy suppliers for a strong milk price.

Ironically, the deal will also have to be a good one for the plc as any hint of the co-op getting a bargain will hit the plc share price, and it is by selling down a proportion of its 54pc share in the company that the co-op aims to pay for the Irish elements of the business.

"The plc lads will have to be seen to drive as hard a deal as possible, while the co-op will have to deliver value for their farmer members," one dairy industry source said.

Farmer reticence on the proposed package appears to centre on the loss of scale that the new entity will possess compared to the existing structure.

"The problem with milk price wasn't Glanbia, it was the retailers," one council member claimed.

He questioned whether the new entity would have the muscle to deal with the multiples and secure a decent return for farmers.

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In terms of the Glanbia brands, another board member pointed out that the plc had heavily invested in their promotion and he doubted that the new outfit would have the capacity to match this level of support.

The fact that the bulk of Glanbia's operating profit was delivered by the plc's foreign investments was another fear raised by board members.

The US cheese and global nutrition divisions last year delivered profits of €90m and boosted operating margins to 11.4pc. This compares to €24m from the Irish arm and an operating margin of just 2.4pc.

Irish Independent