Friday 15 December 2017

Glanbia co-op ready to make €420m offer for Irish stake

Prospective deal is well above most analysts' expectations

Maeve Dineen and Laura Noonan

THE Glanbia co-op is considering offering as much as €420m to buy the Irish businesses of Glanbia plc, according to industry sources. This values the deal well above analysts' expectations.

The news comes almost four weeks after the plc announced it had begun talks with its 55pc co-op shareholder with a view to hiving off Glanbia's Irish dairy division as well as its consumer foods and agri-business sections. An initial offer is expected to be made by the end of the month ahead of two crunch meetings of the co-op's 8,500 shareholders in May.

The deal must be voted through by 75pc of those shareholders in order for it to be agreed and a mammoth effort is under way to convince them of the "win win" merits of the transaction.

At the time, analysts suggested the assets were worth between €250m and €280m, after factoring in pension liabilities of €50m that were likely to transfer with the deal.

It is understood, however, that talks between the co-op and the plc are likely to result in an offer of between €380m and €420m for the business, less about €70m of pension deficit that would move across.

The figures under discussion imply a net deal valuation of between €310m and €350m, against the €250m to €280m mooted by analysts.


Glanbia co-op chairman Liam Herlihy wrote to each of those 8,500 members last week, telling them talks on the deal were "progressing well" and promising to keep them informed of developments.

Once the offer is made at the end of the month, the co-op board lead by Chairman Liam Herlihy will embark on a massive charm offensive, holding 24 separate shareholder meetings in an effort to win shareholder support for the deal

The co-op is also understood to be offering members a one-off cash payout as a sweetener to encourage the transaction. The mechanism under consideration would see farmers offered plc shares in exchange for old Glanbia co-op shares.

In his letter last week to shareholders Mr Herlihy stressed that while the purchase of the Irish business would be funded by a "significant reduction" in the co-op's plc shares, the farmers' group "would continue to retain a strategic investment".

That continued investment is key to sealing a deal, since co-op members have a strong attachment to the plc and are keen to retain its dividends.

Glanbia's share price has risen about 25pc since the deal was signalled on March 10.

The valuations under discussion, however, make it very likely that the co-op will have to sell its stake down below the crucial 25pc mark, making the plc a possible takeover target.

The co-op holds 168 million Glanbia shares; even if it could get them away at last night's close of €3.10 it would still need to sell 100 million of those to raise the minimum €310m needed to fund the deal. Such a transaction would leave the co-op with a stake of 22pc.

Irish Independent

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