The boards of Arrabawn Co-op and Tipperary Co-op have reached agreement on terms for the merger of the co-operative societies.
The proposal for the new entity, to be called Arrabawn Tipperary Co-Operative Society Limited, will be put to a vote of respective shareholders of both co-operatives at special general meetings (SGMs) to be held on 7 November.
The merger would also be subject to regulatory approval.
The details of the merger were given to shareholders of Arrabawn at an information meeting held in Nenagh on Thursday night.
Valuations
Under the terms of the deal, and valuations reached as a result of a period of due diligence, the current Arrabawn Co-op would account for 75.5% of the new entity, with Tipperary making up the balance of 24.5%. This was based on valuations of €161m for Arrabawn and €50m for Tipperary, net of debt.
Chairperson of Arrabawn, Edward Carr, addressing the meeting said that the new co-op would have a transitional board made up of 14 members from Arrabawn, five from Tipperary and two independents. After two years, the size of the board would be cut to 15.
Tipperary Co-op headquarters, in Tipperary Town. \ Donal O' Leary
Similarly, the representative structure would change, with the regional makeup consisting current Arrabawn and Tipperary suppliers joining together in regions, and the total number of representatives for the new organisation falling to 85 after two years.
Carr suggested there may be a small adjustment to the value of Arrabawn shareholdings due to the difference in valuations between the co-ops to ensure each shareholder retained the same value of the new processor.
Conor Ryan, CEO of Arrabawn, addressed the difference in financial performance of both operations, saying that Arrabawn will likely have record profits this year while also paying one of the best milk prices in the country. While he acknowledged the significant debt load at Tipperary – at over €55m – and the losses made last year and likely this year, he said he could see value in the business.
He said Tipperary’s French cheese business, Tippagral, is very profitable and the position it holds in the European market could lead to fresh marketing opportunities for products Arrabawn currently produces.
Due diligence on the production facility in Tipperary Town revealed there are inefficiencies throughout the plant which leaves room savings there by removing those inefficiencies.
He outlined the business plan as:
Identifying the best returning options.Simplifying processes where possible.Reduce costs to take out duplications on both sides.Potentially €8m - €9m of cost savings available.For a strategic point of view, he said that the merger makes sense as it would:
Widen the portfolio of products.Open new markets and customers.Increase the milk pool.Provides long-term opportunities.He added that Tipperary’s plant is well invested and includes an “infant formula standard” dryer.
He said that while casein has been a winning product for Arrabawn, that might not always be the case and the merger with Tipperary would “give a few more irons in the fire."
If your neighbour’s farm comes up for sale, you’ll only ever get the one chance to buy it
On milk price, he said the intention would be to bring Tipperary suppliers up to the Arrabawn price.
Ryan also highlighted the advantages for the Arrabawn agri-business division, with the Dan O’Connor feed mill probably getting new sales opportunities with Tipperary suppliers as that co-op does not have own its own meal supplier.
Overall, he said the new business would be based on three main areas: ingredients, agri-business and cheese.
Finances
Micheál O’Kelly, chief financial officer of Arrabawn went into greater detail on the financial position of the co-ops, and what it would mean for the new society.
On the key issue of debt, he said that while the merger would lead to new debt for Arrabawn suppliers, the level of that debt for the new co-op would be manageable.
Should the merger proceed, he projected that the net debt to EBITDA ratio at the end of 2025 would be at 2.6 times. Arrabawn’s current net debt to EDITDA ratio was a very low 0.5 times at the end of 2023, but had been as high as six times in 2019.
Arrabawn CEO Conor Ryan, chair Edward Carr and chief financial officer Micheál O'Kelly.
He said that Arrabawn has already had very positive engagement with banks on the issue.
He also noted that Arrabawn saw no need for large capital investment, particularly in the Tipperary plant.
Supplier concerns
When the floor was opened to questions, the main areas of concern were around Tipperary’s debt and whether the milk pool could be held on to.
Carr said that it was part of the deal that Tipperary’s milk suppliers come with the co-op. There was a suggestion from the floor that Tipperary suppliers be tied into a five-year supply contract as part of any merger which Carr rejected asking if the Arrabawn supplier would like to be similarly tied. He said that Tipperary suppliers are tied in for two years, and while he was aware that a handful had given in their notice, he felt there was no risk of a mass exodus.
On the debt, O’Kelly, again said that it was manageable, especially as part of the larger operation.
The overwhelming mood in the room was supportive of the deal. Under co-op rules, only milk supplying members will have a vote on 7 November, and if the attendance in Nenagh on Thursday night was any indication of the wider mood, it seems it should pass without difficulty.
As one member of the audience said “if you neighbour’s farm comes up for sale, you’ll only ever get the one chance to buy it."
Carr clarified that the deal with Tipperary was a merger, and not a takeover.
Finally, on the question of who would run the new operation, Ryan said that it would be “one board, one co-op, and one business."
When pushed on what his role might be in the new operation, he said that he is 65 years old now, and that while he is “totally flexible in whatever role the new co-op wants me to have”, Arrabawn has a succession plan in place and there would be strong internal and external candidates for leadership positions.
Meetings on the merger for both Arrabawn and Tipperary suppliers continue next week.
Read more
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Arrabawn and Tipperary enter merger talks
The boards of Arrabawn Co-op and Tipperary Co-op have reached agreement on terms for the merger of the co-operative societies.
The proposal for the new entity, to be called Arrabawn Tipperary Co-Operative Society Limited, will be put to a vote of respective shareholders of both co-operatives at special general meetings (SGMs) to be held on 7 November.
The merger would also be subject to regulatory approval.
The details of the merger were given to shareholders of Arrabawn at an information meeting held in Nenagh on Thursday night.
Valuations
Under the terms of the deal, and valuations reached as a result of a period of due diligence, the current Arrabawn Co-op would account for 75.5% of the new entity, with Tipperary making up the balance of 24.5%. This was based on valuations of €161m for Arrabawn and €50m for Tipperary, net of debt.
Chairperson of Arrabawn, Edward Carr, addressing the meeting said that the new co-op would have a transitional board made up of 14 members from Arrabawn, five from Tipperary and two independents. After two years, the size of the board would be cut to 15.
Tipperary Co-op headquarters, in Tipperary Town. \ Donal O' Leary
Similarly, the representative structure would change, with the regional makeup consisting current Arrabawn and Tipperary suppliers joining together in regions, and the total number of representatives for the new organisation falling to 85 after two years.
Carr suggested there may be a small adjustment to the value of Arrabawn shareholdings due to the difference in valuations between the co-ops to ensure each shareholder retained the same value of the new processor.
Conor Ryan, CEO of Arrabawn, addressed the difference in financial performance of both operations, saying that Arrabawn will likely have record profits this year while also paying one of the best milk prices in the country. While he acknowledged the significant debt load at Tipperary – at over €55m – and the losses made last year and likely this year, he said he could see value in the business.
He said Tipperary’s French cheese business, Tippagral, is very profitable and the position it holds in the European market could lead to fresh marketing opportunities for products Arrabawn currently produces.
Due diligence on the production facility in Tipperary Town revealed there are inefficiencies throughout the plant which leaves room savings there by removing those inefficiencies.
He outlined the business plan as:
Identifying the best returning options.Simplifying processes where possible.Reduce costs to take out duplications on both sides.Potentially €8m - €9m of cost savings available.For a strategic point of view, he said that the merger makes sense as it would:
Widen the portfolio of products.Open new markets and customers.Increase the milk pool.Provides long-term opportunities.He added that Tipperary’s plant is well invested and includes an “infant formula standard” dryer.
He said that while casein has been a winning product for Arrabawn, that might not always be the case and the merger with Tipperary would “give a few more irons in the fire."
If your neighbour’s farm comes up for sale, you’ll only ever get the one chance to buy it
On milk price, he said the intention would be to bring Tipperary suppliers up to the Arrabawn price.
Ryan also highlighted the advantages for the Arrabawn agri-business division, with the Dan O’Connor feed mill probably getting new sales opportunities with Tipperary suppliers as that co-op does not have own its own meal supplier.
Overall, he said the new business would be based on three main areas: ingredients, agri-business and cheese.
Finances
Micheál O’Kelly, chief financial officer of Arrabawn went into greater detail on the financial position of the co-ops, and what it would mean for the new society.
On the key issue of debt, he said that while the merger would lead to new debt for Arrabawn suppliers, the level of that debt for the new co-op would be manageable.
Should the merger proceed, he projected that the net debt to EBITDA ratio at the end of 2025 would be at 2.6 times. Arrabawn’s current net debt to EDITDA ratio was a very low 0.5 times at the end of 2023, but had been as high as six times in 2019.
Arrabawn CEO Conor Ryan, chair Edward Carr and chief financial officer Micheál O'Kelly.
He said that Arrabawn has already had very positive engagement with banks on the issue.
He also noted that Arrabawn saw no need for large capital investment, particularly in the Tipperary plant.
Supplier concerns
When the floor was opened to questions, the main areas of concern were around Tipperary’s debt and whether the milk pool could be held on to.
Carr said that it was part of the deal that Tipperary’s milk suppliers come with the co-op. There was a suggestion from the floor that Tipperary suppliers be tied into a five-year supply contract as part of any merger which Carr rejected asking if the Arrabawn supplier would like to be similarly tied. He said that Tipperary suppliers are tied in for two years, and while he was aware that a handful had given in their notice, he felt there was no risk of a mass exodus.
On the debt, O’Kelly, again said that it was manageable, especially as part of the larger operation.
The overwhelming mood in the room was supportive of the deal. Under co-op rules, only milk supplying members will have a vote on 7 November, and if the attendance in Nenagh on Thursday night was any indication of the wider mood, it seems it should pass without difficulty.
As one member of the audience said “if you neighbour’s farm comes up for sale, you’ll only ever get the one chance to buy it."
Carr clarified that the deal with Tipperary was a merger, and not a takeover.
Finally, on the question of who would run the new operation, Ryan said that it would be “one board, one co-op, and one business."
When pushed on what his role might be in the new operation, he said that he is 65 years old now, and that while he is “totally flexible in whatever role the new co-op wants me to have”, Arrabawn has a succession plan in place and there would be strong internal and external candidates for leadership positions.
Meetings on the merger for both Arrabawn and Tipperary suppliers continue next week.
Read more
Several hurdles to overcome for Tipp/Arrabawn merger
Tarrabawn would not be a merger of equals
Arrabawn and Tipperary enter merger talks
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