Vote on proposal to create Glanbia Ireland joint venture on the horizon

A binding legal agreement has been signed between Glanbia Co-operative Society (Glanbia Co-op) and Glanbia plc to establish a new joint venture to be known as Glanbia Ireland.

As previously announced, Glanbia Co-op proposes to pay €112m to acquire a 60% shareholding in the plc’s Dairy Ireland division; consisting of Glanbia Consumer Products and Glanbia Agribusiness.

Glanbia Ireland will combine Glanbia Ingredients Ireland, Glanbia Consumer Products and Glanbia Agribusiness, as a joint venture 60% owned by the co-op and 40% owned by the plc. It is hoped this venture will build on the Glanbia Ingredients Ireland (GII) joint venture established in 2012.

In order to create a €40m Member Support Fund; Glanbia Co-op has confirmed proposals to distribute, by way of ‘spin-out’, circa 5.9m shares in Glanbia plc to all members of the co-op.

The value of the share ‘spin-out’ is an estimated €100m, based on the Glanbia plc closing share price of €17.13 on Friday, February 17 this year, according to Glanbia Co-op.

This would be worth approximately €6,637 for a member with the average shareholding; for active dairy farmer members the average value of the spin-out would be €10,791 (based on the above share price).

Member Support Fund

The proposal to allocate up to €40m of its resources to a Member Support Fund is subject to member approval, Glanbia Co-op said.

The plan is that this Member Support Fund will be 50% funded through the sale of Glanbia plc shares, with the balance set to come from co-op resources.

Payments from the fund are expected to be in the proportion of 75% patronage to active members and 25% special dividend to all members; the nature and timing of any payments will be at the discretion of the Glanbia Co-op board.

If the proposed transaction is approved by members, Glanbia Co-op will fund the acquisition of 60% of Dairy Ireland and part-fund the €40m Member Support Fund through the sale of about 8.9m Glanbia plc shares (equal to 3% of the issued share capital of the plc).

Currently the co-op holds 36.5% of the issued shares in Glanbia plc. If all of the proposals above are approved the co-op would own 31.5% of the issued share capital in Glanbia plc.

These proposals by the board of the co-op will be voted on by eligible members at a Special General Meeting (SGM) of the co-op which, will take place at Punchestown Event Centre on Thursday, May 18.

‘An exciting development’

The proposed creation of Glanbia Ireland is an exciting development for Glanbia farmers, the Chairman of Glanbia Co-op, Henry Corbally, said.

“It brings the strong portfolio of Glanbia’s Irish dairy and agribusiness assets into majority co-op ownership, while building on the strong partnership with Glanbia plc.

“I would encourage all members to familiarize themselves with these proposals and to attend our SGM in Punchestown Event Centre on May 18,” he added.

Meanwhile, Group Managing Director of Glanbia, Siobhan Talbot, believes the proposed joint venture is a step forward in the right direction.

“Having established Glanbia Ingredients Ireland and successfully managed the transition to a post milk quota environment, there is a compelling rationale to combine the Irish businesses and supply chain to create efficiencies and scale.

As a top 10 dairy company in Europe, exporting to over 60 countries, Glanbia Ireland would have the scale to invest in innovation and growth on a stand-alone basis.

“GII suppliers plan to supply 30% more milk in 2020 than in 2016. The financial strength of the Glanbia Ireland business will allow it to fund a €250m to €300m investment programme to 2020 without a requirement for supplier contributions,” she said.

Approvals and conditionality

The co-op board will seek the approval of eligible members present at the SGM by a simple majority, for the proposal to create Glanbia Ireland.

If this initial proposal is approved by members, Glanbia Co-op is also expected to hold a separate vote on related proposals which will require not less than a two thirds majority vote of eligible co-op members present; including two thirds of members classified as active milk suppliers.

Those proposals are:
  • The sale of up to 3% of the issued share capital in Glanbia plc to finance the proposed transaction and part-finance a proposed Member Support Fund;
  • The spin-out of 2% of the issued shares of Glanbia plc currently held by Glanbia Co-op directly to its members on a pro rata basis, based upon their individual holdings in the co-op;
  • A rule change allowing the board of Glanbia Co-op the discretion to further reduce the co-op’s shareholding in Glanbia plc to 28%, as well as requiring further member approval for any future proposal to reduce the co-op’s shareholding in Glanbia plc below 28%.

The proposal to create the Member Support Fund, which is linked to all of the above proposals, will require the approval of eligible members present by a simple majority.

It is further proposed that all future dividends paid by Glanbia Ireland to the society will be set-aside for distribution to active members, which will require the approval of eligible members by a simple majority.

The proposed transaction will also be subject to approval by Glanbia plc’s shareholders, via an extraordinary general meeting (EGM) on May 22.