An activist investment company has written to the board of Glanbia plc outlining proposals it claims would double the company’s market value.
Last month, the founder of Clearway Capital confirmed that it had acquired a minority stake in Glanbia. The German-based investment firm was established in 2021 by Gianluca Ferrari.
Following a report by news outlet Bloomberg, Ferrari confirmed the acquisition on his Twitter account.
“I can confirm Clearway’s investment in Glanbia and the fact that we have a few cool ideas,” Ferrari said.
Post-tax profits at Glanbia rose to €167.4 million in 2021, compared to €143.8 million in 2020, the full year accounts for the company show.
The company said that it expects high single-digit percentage revenue growth this year in both Glanbia Performance Nutrition (GPN) and Glanbia Nutritionals, Nutritional Solutions (GN NS), largely driven by pricing.
GPN has a portfolio of brands including Optimum Nutrition, SlimFast and Isopure which are sold in more than 100 markets around the world.
Glanbia letter
In the letter sent to the Glanbia board, seen by Agriland, Clearway has now outlined exactly what those “cool ideas” are.
The investment firm believes that Glanbia Plc should be trading at over €21.08 per share but the market continuously prices the company at a substantial discount.
Clearway claims that this is due to sub-optimal execution in GPN, frequent profit warnings and “a confusing corporate structure”.
It also notes that “overarching sustainability concerns pose significant challenges to the company’s long-term viability”.
“Nonetheless, we are optimistic about Glanbia’s potential given the strength of the brands and the quality of the assets that the company owns.
“However, to preserve the value that has been created over the years and further enhance it over the long-term, we believe that the board must act swiftly and decisively,” the letter outlines.
Strategy
Clearway believes that it is in the best interest of the company, shareholders and other key stakeholders to immediately separate GPN into an “independent stand-alone company”.
According to the strategy, GPN would have a dual listing in the United States and Ireland.
It also called on the board to streamline the company’s European cheese joint ventures.
“The outcome of our proposed actions, we estimate, would immediately unlock over €10.88 in additional value per share,” Clearway claimed.
The investment firm believes that its plan would improve execution in GPN and free up capital to invest in and grow Glanbia’s Nutritional Solutions division.
It would also allow the company “work to address overarching sustainability concerns related to dairy production”.
Clearway said that the economic characteristics of Nutritional Solutions make it “a hidden gem within Glanbia’s complex structure that the market clearly does not appreciate”.
Glanbia co-op
Clearway believes that the separation strategy would have benefits for Glanbia Co-operative Society as it would expect “the value of shares to increase by over 100% from current prices”.
It added that this would in turn boost the value of the co-op’s investment fund.
“A separation of GPN would not only create immediate value for all shareholders, including ‘the society’, but by putting the company on an improvement trajectory, it would ensure that consistent value is delivered to long-term shareholders,” Clearway stated.