Business Irish

Sunday 18 November 2018

Greencore may rethink dividend after backlash

Greencore CEO Patrick Coveney said it would reflect on shareholder sentiment. Photo: David Conachy
Greencore CEO Patrick Coveney said it would reflect on shareholder sentiment. Photo: David Conachy
Gavin McLoughlin

Gavin McLoughlin

Greencore may alter the way it distributes the $16bn proceeds from the sale of its US business, after considerable dissatisfaction was expressed by shareholders yesterday.

Investors have overwhelmingly backed the company's plan to sell its US business for more than $1bn, but there was a sizeable rebellion of almost 20pc of shareholder votes against an aspect of the capital distribution plan.

The company wants to distribute the bulk of the sale proceeds as a special dividend - but this will incur an income tax liability for shareholders.

At a shareholder meeting yesterday, multiple retail investors voiced frustration with the company's plan.

One institutional investor, Polaris, went public last week, saying that it thought a share buyback would be better, citing the tax issue as one reason for that.

Speaking to reporters after the meeting, Greencore CEO Patrick Coveney said the capital distribution plan could change.

While the sale is due to complete this month, the proceeds are not due to be paid out until January.

"We're not deaf to the comments of shareholders ... it would be completely remiss of us not to reflect on the sentiment that a lot of shareholders have [expressed]," he said.

But he added that all the advice the company had was that the special dividend was the appropriate mechanism for returning the money.

Greencore chairman Gary Kennedy told the meeting that the dividend would mean all shareholders were treated equally. For example, if the company made an offer to buy back shares at a certain price, the offer may be oversubscribed and not all shareholders would be able to participate.

After the sale, the company will be focused on the UK market.

Mr Coveney said he didn't think the company would look at any acquisitions beyond that market.

Though he declined to give specifics, Mr Coveney acknowledged that the company will have to cut costs to reflect the smaller size of the business.

"We know we have to take out all of the costs that were allocated against our US business previously, such that we don't have a disproportionate level of corporate costs allocated against our UK business.

"So that's going to have implications for everything in terms of the number of people, the nature of the financial arrangements we have, the size of the board, the size of the corporate office, the way in which we organise functions."

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