Over 200 Kerry Co-op shareholders and milk suppliers attended a meeting organised by the Irish Farmers’ Association (IFA) in Tralee last night (Friday, November 22) to discuss the proposed joint venture between Kerry Group and Kerry Co-op.
Earlier this month, Kerry Group confirmed that it had reached agreement with Kerry Co-op on the proposed €500 million sale of its dairy division, Kerry Dairy Ireland, to the co-op.
Kerry Co-op would initially acquire a 70% interest in Kerry Dairy Ireland for €350 million, with Kerry Group retaining a 30% stake.
The co-op would then have a call option to acquire the final 30% stake at any time from completion of the initial acquisition until mid-2030.
Both parties are hoping to have the first phase of the deal completed by the end of January 2025.
However, this will all depend on the approval of both Kerry Group and Kerry Co-op shareholders.
A Special General Meeting (SGM) of the Kerry Co-op will take place at 12:00p.m on Monday, December 16, 2024 at the Gleneagle INEC Arena, Killarney, Co. Kerry.
The proposed transaction will only proceed if approved by the required majority (66%) of the co-op’s A and B shareholders who are present at that meeting; there will be no postal vote.
Ahead of the SGM, the co-op will be hosting a series of information events for all shareholders at venues in Kerry, Limerick, Cork and Clare, kicking off on Monday (November 25) in Dingle at 1:00p.m.
Dairy deal
Chair of Kerry IFA Jason Fleming said that the proposed deal is the “hot potato” which has dominated discussions at recent local IFA branch Annual General Meetings (AGMs).
He said that the purpose of last night’s meeting, which was also attended by five members of the Kerry Co-op board, was to provide information to shareholders so they can make an informed decision on the proposal.
Fleming said that there was “an awful lot of speculation” out there and he believed there was “too much of a gap” between the announcement of the deal and the Kerry Co-op information meetings.
The event was addressed by Thomas Culloty and Karol Kissane from Ifac, the farming, food and agribusiness specialist professional services firm, who outlined the main details of the deal.
Both men had held discussions with the main advisors to Kerry Co-op on the proposed deal, Jim Woulfe, PWC and EY.
The event offered an insight to the co-op board on some of the concerns its shareholders have on this potential milestone deal ahead of its own meetings over the next two weeks.
Kerry Co-op currently holds an 11% shareholding in Kerry Group with a value of around €1.7 billion.
Under the proposed deal, there would be a share exchange and redemption process whereby the co-op shares acquired by Kerry Group plc will be redeemed and the co-op will cease to be a shareholder in Kerry Group.
85% of co-op shares, valued at around €1.4 billion, would be converted into Kerry plc shares at the rate of 6.25 plc shares for every one co-op share held.
The remaining 15% of co-op shares, worth an estimated €250-260 million, will be used to buy Kerry Dairy Ireland.
The meeting heard that there would be no tax implications from the share exchange, until such time as a member decides to sell or pass on those shares.
However, many shareholders said that a written guarantee must be provided by Revenue on this tax position, with one calling for “a letter of indemnity”.
The board members present said that PWC and EY had received assurances from Revenue that there would be no tax implication as a result of the share conversion.
They urged all shareholders to attend the upcoming information events where they could question the tax experts from PWC and EY.
A call was also made for all shareholders to be treated equally when it comes to electing members to the new board, which will include seven co-op appointments.
Under the co-op rules, currently only A shareholders – milk suppliers – can hold a seat at either co-op advisory or board level.
The meeting heard that the €150 million contribution of B (2,973) and C (6,329) shareholders – the so-called ‘dry shareholders’ who do not supply milk to Kerry Dairy Ireland – needs to be recognised.
Kerry Co-op
Some of those present asked how Kerry Dairy Ireland would deal with a potential drop in milk supply in the coming years.
The meeting heard that PWC and EY have “stress tested the business” and found it “has the capacity to perform very well, even with a reduced supply volume”.
Another shareholder at the meeting voiced concern about milk suppliers “drifting away” due to being unhappy with milk price.
Conor Creedon, vice-chair of the Kerry Co-op, said that the business is “being set up primarily for dairy farmers”, while adding that all shareholders must be treated equally.
“This is a very well run and very profitable business [Kerry Dairy Ireland], that profit has been, since 1986, going back in and funding the plc [Kerry Group].
That profit, if this goes through, will now be used to look after [co-op] shareholders in an equitable manner and pay a very, very strong milk price.
“We have budgets done going out to 2035, the board has given a long time at this, we’re very confident of this business. We’re very confident that no-one will want to leave this business on economic grounds.
“People might have other reasons for leaving, but there will be no milk supplier will walk away from this because they will be getting a higher price somewhere else,” he said.
James Doyle, a former chair of Kerry Co-op and the farmer who represented suppliers in the arbitration case on leading milk price against Kerry Group, claimed that the proposed €50 million fund to resolve the arbitration issue was “a bribe to get this deal through”.
He was critical that the fund from Kerry Group would only be applicable to contracted milk from 2015-2020, as opposed to all milk supplied.
In response, Conor Creedon said that the board had received legal advice that the offer from Kerry Group, which would equate to a cumulative payment of 5.4c/L over the period, represents “a very good deal”.
The arbitration offer is dependent on the first phase of the proposed joint venture being completed.
A milk supplier, who is not a shareholder, also told the meeting that this decision, which is “in the hands of a lot of other people”, is going to have a major effect on his farm business.
“I’m the man who will still be milking cows, please God, in 20-25 years’ time and this decision has a massive impact on where I’ll go from here,” he said.
He said that the new entity will have to support farmers on issues such as input costs, particularly in more difficult years.
“Where is the future in this for the farmer, the primary producer? That’s the big concern I would have.
“You can talk all you want about shares but milk price is what farmers get paid on and that’s our future. That’s how the man on the ground makes his repayments,” he said.
The board members at the meeting, who are also milk suppliers, said that this deal would “secure the future for people milking cows” by returning control of milk processing back to suppliers.
Some of those in the room were positive about the deal, with one shareholder describing it as a “win” for shareholders and milk suppliers.
Kerry IFA chair Jason Fleming concluded the meeting by saying there were still many questions to be answered and he appealed to all shareholders to attend the upcoming information sessions being held by the co-op.