Ornua overhaul plan in hands of smaller co-ops

The Ornua office on Dublin’s Mount Street. Photo: Damien Eagers
The Ornua office on Dublin’s Mount Street. Photo: Damien Eagers

Declan O'Brien and Margaret Donnelly

Smaller dairy co-ops will decide the fate of a radical plan to overhaul the governance and shareholder structures of Ornua.

It is has emerged that at least 26 of the 34 individual co-ops that are Ornua shareholders will have to back the restructure proposal if it is to be accepted.

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The proposed changes, which were tabled by Dairygold at Ornua's last board meeting, involve the conversion of the dairy marketing body into an unlisted PLC - with the current co-op shareholders holding 80pc of the new company and 20pc going directly to dairy farmers.

In addition, the plan would result in the main dairy processors relinquishing their dominant position on the Ornua board.

However, the sweeping changes included in the Dairygold initiative require both a rule change and a special resolution under the legislation governing co-ops.

The rule change will need the support of at least two-thirds, or 23, of the co-op shareholders in Ornua. The special resolution - which is required to change the status of Ornua from a co-op to an unlisted PLC - will require 75pc shareholder backing, or the support of at least 26 co-ops.

However, opinion is divided on the level of backing that exists among the dairy processors for the proposed changes.

It is believed that some of the larger co-ops strongly support the initiative as it removes the current requirement that processors must sell a given share of their produce through Ornua.

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It was pointed out that Glanbia, Lakelands and Dairygold have all found themselves actively competing with Ornua on export markets over the last few years.

The switch from co-op structure to PLC would also improve the balance sheet of the larger processors by putting a value on their Ornua stakes - even though the shareholdings could not be openly traded given that the business would be unlisted.

The loss of direct representation for the co-ops on the Ornua board is not viewed as a major issue. ­Relations at board level have been described as "fractious" since the launch of Glanbia's 'Truly Grass Fed' brand in the US last autumn brought the issue of shareholder-members competing with Ornua to a head.

Industry sources maintained that the dairy processors don't need to be involved directly in Ornua, as long as a strong board is in place to hold the management to account.

Currently, all the main dairy processors, with the exception of Kerry Group, are represented on the Ornua board.

This reflects the co-op ownership of the marketing body.

However, under the Dairygold proposals the board would consist of five non-executive board, five co-op representatives, and one representative each from the IFA and ICMSA.

It is understood that five co-op representatives could not be on the board of their own co-op or be management executives.

It has been suggested that the five co-op board members would be elected from an 'outer council' of 40-50 co-op representatives.

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