Clock ticking on Kerry joint venture deal

The Irish Farmers Journal understands that Kerry Group is willing to wait until next week to finalise a deal with the Kerry Co-op on its proposed milk processing joint venture.

The board of Kerry Co-op met this Tuesday but a number of additional meetings also took place this week to finalise the proposal for the purchase of 60% of the Irish dairy business.

It had been expected that a deal could have been reached before Easter but it now looks likely that might move into next week.

Kerry Co-op members are still divided on how to resolve the long-running leading milk issue as part of this new deal.

More speculation on the fundamentals of the deal from the Kerry Group side are beginning to emerge

The legacy milk price deal is causing some frustration among some co-op board members who want to move on with the joint venture deal. Our sources confirmed that no deal has yet been agreed among Kerry Co-op members. More speculation on the fundamentals of the deal from the Kerry Group side are beginning to emerge.

We believe one of the funding options that has emerged as a frontrunner this week is that a first slice of profits from the proposed joint venture would be allocated to milk suppliers each year.

A second slice of profits would be allocated to reinvestment in the business and then any further profits allocated pro rata with ownership

This would be part of a follow-on payment to the original commitment by Kerry Group to pay the leading milk price. This could be in the range of €25m per year, around 2c/l.

It is understood that the remaining 3c/l relating to the legacy issues would not be delivered in this scenario.

A second slice of profits would be allocated to reinvestment in the business and then any further profits allocated pro rata with ownership.

If an initial agreement can be reached, we understand the option to allow the co-op purchase the balancing 40% Kerry Group stake in the joint venture is still on the cards.

An announcement could come next week, but as one board member said there is no deal until all is agreed.

No communication plan to suppliers has been developed yet as board members continue to grapple with how to fund the new joint venture.