A change in the ownership structure of Glanbia Ireland (GI) is getting closer, industry sources have indicated to Agriland.
At present, ownership of GI is divided between Glanbia Co-op and Glanbia plc (public limited company), with the former owning 60% of GI and the plc accounting for 40% of the business.
GI – among other activities – processes milk from farmer suppliers throughout the country.
The co-op also owns just over 30% of the plc. Sources have suggested that it is increasingly likely, at this point, that the two entities will arrive at a deal whereby the co-op reduces its shareholding in the plc and uses the funds raised to increase its stake in GI.
Such a deal may be worth in the region of €500 million. The possibility of a deal of this nature has been talked about for a number of years.
Benefits of Glanbia restructure?
It is understood that both the plc and the board of the co-op have their reasons for going down this route.
Apparently, the plc favours the move as it may potentially attract further investment in its own shares if the co-op’s shareholding was reduced.
Meanwhile, the co-op is seemingly looking to bring the milk processing business back under the umbrella of farmer members and suppliers.
For the board of the co-op, it is thought that one of the main areas of contention in the current relationship is a 3.7% minimum profit margin that GI must maintain in order to guarantee a dividend to its shareholders – an arrangement that was agreed when GI was first formed in a deal between the co-op and the plc.
There is an argument made by some in the co-op that this minimum profit margin puts a downward pressure on the milk price offered to farmers.
However, other sources have suggested that a restructuring may not necessarily be of benefit to farmers.
There is a concern – in a situation where the plc attracted investment from international players – that the relationship between the plc (which is in a contract to take the processed milk from GI) and the processing business would be altered to the potential detriment of the latter.