Kerry Co-op will today (Monday, November 25) hold the first in a series of information meetings for shareholders on the proposal to buy Kerry Group’s dairy division.
Earlier this month, it was confirmed that Kerry Group and Kerry Co-op had reached an agreement to sell Kerry Dairy Ireland to the co-op for a total expected of price of €500 million.
Under the proposal, the co-op will initially acquire a 70% interest in Kerry Dairy Ireland for €350 million, while Kerry Group will retain a 30% interest.
The co-op will have a call option to acquire the final 30% stake at any time from completion of the 70% acquisition until July 31, 2030.
If the call option is not exercised, Kerry Group will be able to require the co-op to acquire the final 30% stake by 2035.
Both parties are hoping to have the first phase of the deal completed by the end of January 2025, but the move will firstly have to secure the approval of both Kerry Group and Kerry Co-op shareholders.
Dairy deal
Kerry Co-op currently holds an 11% shareholding in Kerry Group with a value of around €1.7 billion.
This proposed deal would require a share exchange and an associated 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.
The proposal would involve 85% of co-op shares being converted into Kerry plc shares at the rate of 6.25 plc shares for every one co-op share held.
These shares, valued at around €1.4 billion depending on the market, would be given directly to members to keep or sell at a time of their choosing.
The remaining 15% of the shares, worth an estimated €250-260 million, will be used to buy Kerry Dairy Ireland.
In order to reach the €350 million needed to buy the 70% interest in Kerry Dairy Ireland, the co-op will fund the balance through loans from third party banks and Kerry Group.
As part of the deal, Kerry Group will be entitled to a fixed dividend of €7.5 million per annum during the period of the joint ownership.
A 1c/L “participation contribution” on all milk supplied from 2026 would also be applied in order to help fund the cost of buying the remaining 30% stake in the dairy business.
Another aspect to the proposal relates to the long-running dispute over arbitration in relation to the leading milk price issue.
If the first phase of the joint venture deal is completed, Kerry Group will establish a €50 million fund for “the resolution of the ongoing dispute and related claims and arbitrations”.
Under this fund a cumulative total of 5.4c/L will be paid to everyone who supplied milk to Kerry Group in the years from 2015 to 2020, as per their milk supply contract. This payment will not apply to milk supplied above the contracted amount.
Kerry Co-op
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.
There are currently three different share classes in Kerry Co-op, only A and B shareholders have the right to vote in matters relating to the running of the co-op.
There are 2,604 A shareholders who are actively supplying milk to Kerry and 2,973 B shareholders who have ceased to supply milk.
An A shareholder that ceases to supply milk is reclassified as a B shareholder after a period of five years.
There are also 6,329 C shareholders who have never supplied milk to Kerry. This would occur in instances of an inheritance of shares or commercial purchases.
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.
The first meeting will take place at the Dingle Skellig Hotel in Co. Kerry at 1:00p.m today (Monday, November 25).
The final information session will be held at the Dunraven Arms Hotel in Adare, Co. Limerick at 8:00p.m on Thursday, December 5.
The full schedule of the information meetings is listed below:
On Friday night (November 22), over 200 Kerry co-op shareholders and milk suppliers attended an information meeting organised by the Irish Farmers’ Association (IFA) in Tralee.
Chair of Kerry IFA Jason Fleming said that the purpose of the event, which was also attended by five members of the co-op board, was to provide information to shareholders so they can make an informed decision on the proposal.
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.