Thursday 21 November 2019

A good deal for the PLC -- but farmers have yet to be convinced

Peter Flanagan

GLANBIA's plan to spin off its milk-processing business into a joint venture, split 60:40 between the co-op and the PLC, will undoubtedly benefit the PLC -- but co-op shareholders are clearly undecided about whether they want it to go ahead.

In an unusual move, at yesterday's meeting of the co-op council a number of the co-op's own directors spoke against the plan that it is proposing to its members.

Concerns about the deal stem from a number of factors. Two years ago the PLC came within an ace of divesting itself of its Dairy Ireland business and some farmers see yesterday's announcement as a similar plan by the back door.

Under the plan, the co-op will sell 13pc of its PLC holding. About 7pc of those shares will be distributed directly to co-op shareholders. Some farmers are concerned that this will be the beginning of the end for their investment in the PLC.

If the joint venture needs more capital, the easiest way to finance it would be to sell PLC shares, while the projected indebtedness of the new company is also a worry.

Most importantly, opponents of the deal are asking why they should give up their holding in a group that has been a licence to print money in recent years.

Since the last vote, Glanbia's share price has more than doubled and its margins are more than twice those of Dairy Ireland.

As was reflected by yesterday's share price jump, this deal is in the PLC's interest. Whether it can convince a majority of farmers that it is good for them too remains to be seen.

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