A group of former directors of Kerry Co-op have expressed misgivings about the proposed Equity Redemption Scheme, which will see shareholders given the option of converting their shares to cash.
Among their main concerns is that, according to them, Kerry Co-op will take 5% of each shareholder’s holding, regardless of whether or not they apply for the scheme.
According to Cathal Foley, from Kilorglin, that 5% will be used by the co-op to create an €80 million fund for “new ventures”.
To come up with this money, they have to dip into every member’s holding. That has not been made clear.
Foley says that the board is not providing details on how the money will be spent.
Section 701 status
A number of other questions have arisen in relation to the scheme, particularly where taxation is concerned.
According to the Shareholders Alliance – which opposes the scheme – all sales, or transfers of shares, by current shareholders will be liable to income tax, and will vary depending on the personal circumstances of the individual members.
Walter Costelloe, from Scartaglan, and who was on the board of both Kerry Co-op and Kerry Group, claimed that “this scheme won’t help and it won’t bring back Section 701 status”.
‘Lack of overall strategy’
Donal Counihan, from the Killarney area, is the chairman of the Kerry Co-op Milk Suppliers and Shareholders Alliance.
“We suggested changes to the scheme that would help but they weren’t taken on board,” he argued, adding that the board of the co-op has a “lack of overall strategy”.
Counihan continued: “The co-op spent a lot of money on consultants when considering buying Kerry Agribusiness. But what happens when the co-op’s stake in Kerry Group falls to 5%? This triggers a lot of tax problems which need to be addressed now.”
This “jeopardises the shareholders’ funds”, he claimed.
Fellow shareholder Patsy O’Connell, from Currans, claimed that the scheme was being rushed through, and that the board’s handling of it has caused “a lot of confusion”.
Eoghan McCarthy, a former monitor farmer from Milltown, says that a restructuring of the co-op is necessary.
“There are over 13,000 shareholders and only 3,300 milk suppliers. The co-op board no longer meets with the key people in Kerry Group. The fact that 40% of the shares in Kerry Group plc are held by farmers and their families is the best chance we have to secure strong representation as dairy farmers,” McCarthy argued.
This scheme will place Kerry Group plc shares with institutional investors rather than leaving them with local shareholders.
James Brosnan, from the Tralee area, said that the current board is divided, and this is preventing proper discussions from taking place between the co-op and its members.
The last former director to make a contribution to the discussion was Liam Healy from Listowel, who called for shareholders to push the board on what its plans for the co-op are, at the annual general meeting (AGM) tomorrow, Wednesday, June 19.
“Most people would prefer Kerry Group plc shares instead of cash. I can’t see the current board coming up with a scheme that everyone can avail of,” argued Healy.
A vague strategy about being relevant to members is not good enough. The current board is on the way out. They shouldn’t block future boards from addressing the future of the co-op.
The AGM is set to be held at 12:00pm in the Brandon Hotel, Tralee, tomorrow.