Glanbia Co-operative Society Limited (the “Society”), this week confirmed that it has signed legal contracts with Glanbia Plc in a significant step towards the completion of the proposed Joint Venture, which would see the Society acquire a 60% stake in Dairy Ingredients Ireland - the Irish dairy processing business of Glanbia. The Society also announced that the vote on the proposed Joint Venture will take place at local polling stations throughout the Glanbia catchment area on Tuesday, November 13.
Almost 7,800 members will be invited to attend at their regional polling stations to vote on the Joint Venture proposal. The Joint Venture will facilitate the continued development of the existing global Dairy Ingredients Ireland business, including the flexibility to expand milk processing capacity post the abolition of milk quotas in 2015. Approval for the Joint Venture is required from in excess of 50% of Society members who are present and voting on the day.
The business being Joint Ventured is the largest dairy ingredients processor in Ireland, assembling a milk pool of 1.6 billion litres, and processing this into c.180,000 tonnes of dairy ingredients, for export to over 50 countries. The new Joint Venture, to be known as Glanbia Ingredients Ireland (GII), will create a platform for up to 60% growth in milk output by members by 2020. The Society’s stake will be substantially funded by the sale of 3% of the issued share capital of Glanbia plc, of which the Society is currently the 54.4% majority shareholder. The balance will be funded by a loan not from the plc, if necessary.
If the Joint Venture transaction is approved by members on 13 November and by plc shareholders on 20 November (as it is a related party transaction), the Society will, at two separate General Meetings, seek further member approval on a Share Spin-Out and Sale proposal which would reduce its shareholding in Glanbia plc to below 51% ( to 41.4%). This would include a spin-out or distribution of 7% of plc shares to members - valued at c. €142 million (closing price of €6.90, Friday, 28 September). Dates for these meetings will be announced by the Society in due course.
Speaking about the vote on the Joint Venture, Glanbia Chairman, Liam Herlihy said: “We believe that now is the correct time to evolve the existing co-operative and plc model which was introduced in the quota era that began almost 30 years ago. A ‘yes’ vote on November 13 will usher in a new era for milk production growth, for dairy processing ownership and for your Society’s relationship with Glanbia plc. While the Society will acquire the controlling (60%) stake in the new business, Glanbia plc will remain significantly involved in the business as a 40% partner. In addition, the Society will continue to be a very significant shareholder in Glanbia plc.
“The proposed structure means farmers will have direct, 60% ownership of assets that are critical to milk production and expansion. The new business will have a separate Board, with proportional representation and it is this Board which will make all decisions, and agree the milk price and strategy for GII.”
Second vote – Share Spin-Out and Sale
If the JV vote is successful, Society members will then be invited to vote at two General Meetings on the proposed Share Spin-Out and Sale proposal which would reduce its shareholding in Glanbia plc to 41.4%. This includes a spin-out or distribution of 7% of plc shares to members and a further 3% share sale by the Society. The proceeds from the 3% sale would enable the Society to contribute more cash equity into the joint venture (in portion to additional equity from the plc) as well as creating a cash reserve for the Society. Under this scenario, the Society would be aiming to be debt free within two years, or potentially earlier, of the JV completion. If the JV is not approved neither proposal will proceed.
The spin-out or distribution of 7% of plc shares valued at c. €142 million (closing price of €6.90, Friday, September 28) offers members the choice to participate directly in the success of the plc by holding or selling the shares. If the share spin-out and sale is approved, the Society would remain the largest shareholder in the plc, with a 41.4% interest valued at €842 million (based on closing plc share price of €6.90 on 28 September 2012). Concluding , Glanbia Chairman, Liam Herlihy encouraged members to be fully informed of the choices to be made about the direction of their Society, and advised members to attend the local information meetings and read the detailed information brochure, which has been posted to all members in recent weeks.
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