Farmers voting in Clonmel, and across the country, have overwhelmingly approved a new joint venture which will see the Glanbia Co-Op Society purchase 60% of Glanbia’s subsidiary company Dairy Ingredients Ireland.
The deal will see the Society reduce it’s share in the company from 54.4% to 51.4%
A second vote, next week, could see that share reduced further to 41%, in a share spin-out sale that could mean E30 million in start up fudning to the new joint venture, and the distribution of E162 million in plc shares to members.
Glanbia PLC shareholders met in Kilkenny on Tuesday of this week to vote on the matter.
The Joint Venture transaction incorporates the business and assets of Dairy Ingredients Ireland (DII), a business unit of the Dairy Ireland division of Glanbia, including its 45% share of the Corman Miloko Ireland JV and its 23% shareholding in the Irish Dairy Board. Under the proposed transaction, the new joint venture, to be known as Glanbia Ingredients Ireland (GII) will be 60% owned by the Society and 40% owned by Glanbia. The business, net fixed assets, working capital and liabilities of DII will be transferred to the joint venture, which will also assume the relevant pension obligations of DII.
Last week’s 71% approval of the first proposal has been welcomed by farming organisations.
Commenting on the result, the ICMSA President, John Comer, said his Association acknowledged and welcomed the decision. He said that having received the mandate they had sought it was now wholly incumbent upon the board and management of the joint venture to deliver – in full – on the commitments they had made to their farmer-suppliers in terms of milk price and maximising the returns that would be delivered to the farmers.
Mr Comer said that the assurances of the boards had been accepted in good faith and it was now a question of the boards delivering, and being seen to deliver, on the solemn assurances offered and accepted.
IFA President John Bryan welcomed the strong turnout of 77% and the decision by Glanbia Co-op shareholders to set up the new Glanbia Ingredients Ireland (GII) Joint Venture. He said, “The positive result, with 71% in favour, reflects my view, and that of our Association, that the proposal was balanced and fair.
“The debate on the GII proposal, while intense, is now over. We must all respect the genuinely-held and differing points of views. However, democracy has spoken and all farmers should now unite and support the second proposal”.
John Bryan said the establishment of GII clears the way for further consolidation in the sector, and the opportunity must be grasped.
He said, “By voting yes again at the next two co-op SGMs, and securing over 75% support, farmers will ensure that all shareholders can benefit fairly by unlocking some of their historical investment in the co-op in a share spin out. They will also eliminate the co-op’s debt and allow it to build a cash reserve from the future dividend income from the Plc, which can be used for the benefit of all shareholders. Finally, by generating additional equity from share sales, they will further improve the financial outlook of GII,” he said.
IFA National Dairy Committee Chairman Kevin Kiersey said: “Glanbia shareholders must be commended today. By voting yes to GII, they have wisely helped secure greater farmer control of dairy processing and provided for additional processing capacity in advance of the post-quota expansion, while taking on a minimal burden of debt”.
Mr Bryan and Mr Kiersey concluded: “Now that the first phase of the proposal is decided on, we urge all shareholders to reflect on the benefits and fairness of the second part of the deal, and to come out and vote at the end of the month. We recommend a strong ‘yes’ vote on the second set of proposals”.
John Moloney, Group Managing Director of Glanbia plc said: “After a number of months of constructive and informative debate, we greatly welcome the strong endorsement by Society members of the Joint Venture proposal. The Joint Venture presents substantial strategic opportunity for both Glanbia and the Society. From a Society perspective, it creates a strong platform from which to grow milk volumes and capture the benefits arising from increased milk production and processing post the abolition of milk quotas in 2015. For Glanbia plc, the Joint Venture enables it to continue its successful international growth strategy and maximise value for all shareholders.”