The board of Kerry Co-op has received fresh legal advice around the potential to include a share redemption scheme in the co-op rulebook.
In June, the board decided against putting a planned resolution on the issue to shareholders following a legal opinion.
Chair of the Kerry Co-op board, Denis Carroll has confirmed to Agriland that the board will discuss the matter at a meeting next week. However, he would not disclose the contents of the new legal advice.
“Certainly, I as chairman and we as a board can stand over what we did in June. Being a director in Kerry Co-op carries very serious responsibilities and being chairman event carries a higher level of responsibility that we do the right thing.
“Now we have sought more advice and we haven’t as a board got an opportunity to reflect or consider that new advice we got but we will be doing that on Tuesday (November 15),” he said.
Share redemption scheme
Kerry Co-op is the largest shareholder in Kerry Group with an 11.4% stake in the company worth around €2 billion.
This week, a group of co-op shareholders confirmed that they are seeking to compel the board to hold an emergency vote on the share redemption scheme issue.
The group want a conversion rate for their shares of one to 5.9 plc shares to be added to the co-op’s rulebook.
Separate legal advice sought by the group from a senior counsel outlined that the board is not prohibited from ring-fencing co-op funds for the redemption scheme.
The group is planning to submit a document containing the signatures of around 1,600 shareholders to the board on Friday.
“If there’s a legitimate resolution or request put in front of the board which adheres to the rules, we as a board, and I as chairman, have to adhere to the rulebook.
“The benchmark here is that if that 20% of the shareholders representing 20% of the shareholding within Kerry Co-op make a request, we will have to adhere to that request,” Carroll said.
“The first thing that will have to be done is that the signatures will have to be verified, whether that will be done by next Tuesday’s meeting I am not sure but we’ll certainly deal with it and we will not hide behind procedure if this is a legitimate claim.
“What these people are requesting with their resolution is something we had attempted to do, but we were advised against it,” he added.
“We need to be very measured as a board in how we deal with these issues and that we don’t leave a future board with a legacy issue of our making. So we just need to keep cool heads here, reflect on this and do the right thing.
“The courts of the country are full of barristers with conflicting advices so we just need to be very careful here that we don’t get sucked down a rabbit hole with legal advice and this and that,” the co-op chair said.
Including the share redemption scheme in the co-op rulebook would have the effect of ringfencing the majority of the co-op’s share capital and require the board to seek shareholder approval for any major investment.
This could have implications for any future joint venture deal involving the co-op buying Kerry Group’s milk processing business.
The group of shareholders are concerned that co-op funds will be substantially reduced to pay for the deal while shareholders with no interest in milk processing will see their value in the co-op reduced.
“They are very legitimate concerns, but I have publicly stated as chairman, and it is the position of the board, that if we do decide to set up a joint venture with Kerry Group that we will certainly bring that back to the shareholders for their approval.
“The reality of the situation is that without our shareholders, we as a board are going nowhere. We need to bring our shareholders with us and what we’re asking is just to give us time,” Carroll said.
The co-op chair said that he is available to meet with any group of shareholders.
“But people need to understand we’re responsible for all shareholders and we cannot be just answerable to one specific group of shareholders. We’re answerable to all and we need to do the right thing,” he said.
Joint venture
In April 2021, talks between Kerry Co-op and Kerry Group on a potential dairy business deal were suspended after over 18 months of discussions.
Carroll said that “as of now” the co-op is not in talks with Kerry Group in relation to the joint venture. He said that there are “lots of issues to iron out” before discussions can resume.
He also confirmed that the co-op has not carried out due diligence on the potential deal since he became chair.
“If we go back into talks and have a look at this joint venture, we will approach it with a very professional team and we need resource that team because there are lots of complexities in relation to this joint venture.
“They have been highlighted to me at every meeting I go to; genuine concerns by people about who is going to run it, what expertise Kerry Co-op has, concerns about plants. There’s a plethora of issues and we need to deal with all those.
When asked if he sees the issue of the valuation of Kerry Group’s dairy business as a potential stumbling block, Carroll said that the co-op is “not going to pay over the odds”.
“Every businesses’ valuation can be an issue but there’s a lot more to it than that.
“All I can say on valuation is this business is worth so much and that’s what we will value it as and if Kerry Group accept that, well then we have a deal, but there’s much more to the deal than just the valuation.”