Glanbia Co-operative Society has signed a non-binding agreement with Glanbia plc to take full ownership of Glanbia Ireland (GI), it has been announced this morning (Wednesday, November 10).
Currently, GI operates as a strategic joint venture, 60% owned by Glanbia Co-op and 40% owned by Glanbia plc.
Subject to the successful conclusion of contract negotiations and the relevant shareholder approvals within both the plc and the co-op, the latter proposes to pay €307 million to acquire the plc’s 40% shareholding in GI.
The plc will contribute €8 million related to pension, rebranding and separation costs in connection with the proposed transaction.
In addition, it is agreed that GI will not be required to pay the dividend payable to the plc in 2022 in respect of the 2021 financial year (estimated at €14 million) and up to the closing of the proposed transaction.
Up to 50% of the cost payable for the proposed transaction will be funded by the co-op through the sale of shares in the plc (estimated at approximately 11.5 million shares), with the balance to be funded through borrowings.
The deal will see GI and the co-op change their respective names – following a transitional period – to names which do not include the word ‘Glanbia’.
GI will maintain certain commercial arrangements with the plc for the sale and purchase of various products until the GI name change has been implemented.
Spin-out of Glanbia plc shares to Members
Glanbia Co-op also proposes to transfer, via share spin out, 12 million Glanbia plc shares to all its existing members. Based on the plc’s closing share price of €13.98 on November 9, 2021, this would be worth approximately €168 million, or €11,028 for a member with an average shareholding.
This follows the spin-out of a total of 36.5 million plc shares worth over €510 million by the co-op in 2013, 2015 and 2017. The co-op is the largest individual shareholder in the plc, holding 93.3 million shares or 32.4% of the issued share capital of the company.
Glanbia co-op proposes to create an Investment Fund, which will be available to “pursue new opportunities” for the co-op.
This fund will be activated, when required, at a future date through the placement of up to 12 million Glanbia plc shares (value of €168 million at current share price).
Following the completion of the GI transaction (4%) and spin-out of PLC shares to Members (4%), the co-op’s shareholding in the plc will be reduced from 32.4% to approximately 24%.
In the event that the full Investment Fund is deployed, the co-op’s shareholding in the plc would be reduced to approximately 20%.
At the forthcoming Special General Meeting (SGM), the board of the co-op will also seek to retain the existing 3% contingency around the threshold for general business purposes.
Commenting on the proposed deal, Glanbia Co-op chairperson John Murphy said: “These proposals are driven by our ambition to pay the best possible price for milk and grain to our farmer members.”
“If our members approve this proposal, we will have a very strong co-op, with full ownership of Glanbia Ireland. We will remain the largest investor in Glanbia plc, which is focused on growing as a global nutrition company, benefiting all shareholders,” Murphy added.
Jim Bergin, the co-op’s chief executive, said: “Glanbia Ireland is a very strong standalone business… We are very ambitious for this great business and are excited by the opportunities presented by this natural evolution to a pure co-op.”
The plc, meanwhile, said that the proposed transaction is “consistent with the plc’s strategy to focus on its two growth platforms, Glanbia Performance Nutrition (GPN) and Glanbia Nutritionals (GN), as well as strategic joint ventures”.
The plc’s managing director Siobhán Talbot said: “If approved, the proposed transaction will continue the alignment of our portfolio to our strategy, which is focused on driving growth through our market leading positions as a brand owner and ingredient solutions provider.”
The deal will see Talbot retire from her position on the co-op’s board “effective immediately”.
Within one year of completion of the transaction, all amounts owed by GI to the plc in respect of an existing shareholder loan of €28.8 million will be satisfied (this is separate from the cost of the transaction).