More than 14,700 members of Glanbia Co-op will see almost 6m Glanbia plc shares arrive totalling €92m based on Friday’s closing price of €15.71.

A co-op member with 2,000 shares will receive 305 plc shares which have a current value of €15.71, amounting to €4,791. They will see 87 co-op shares cancelled.

Farmers will welcome the arrival of the shares after they voted in May for the spin-out and the creation of Glanbia Ireland. At a time of significant investment on their farms, it is expected that some farmers will sell the shares.

Result

As a result of the spin-out, the acquisition of 60% of Dairy Ireland from the plc and the creation of a €40m member support fund, Glanbia Co-op’s ownership of Glanbia plc has reduced from 36.5% to 31.5%. The co-op holding is valued at around €1.5bn based on Friday’s closing price.

Share price

Before the proposal was first announced in February, the shares were trading at €17.30/share. In the intervening months, the share price rallied and at one stage in April shares touched €20. The market viewed the spin-off of the low-margin Dairy Ireland as positive for Glanbia plc, leaving it focus on the high-growth, high-margin divisions of ingredients and performance nutrition.

On the day of the vote to establish Glanbia Ireland, the shares closed at €17.77.

Many farmers are questioning the reasons for the almost 25% decline in the share price since April.

In its latest trading update issued last month, Glanbia reiterated its full-year guidance despite slowing growth and falling margins in its performance nutrition division, which now accounts for around half of profits.

However, it may be the first signs of a correction in the valuation of the Glanbia share price which had been trading at up to almost 30 times earnings (almost €20/share) due to the growth in performance nutrition. At the current share price, it is trading at the more affordable price of 21 times earnings.

Hold or sell

Co-op members receiving the shares over the coming month will be deciding to either hold or sell. For those who wish to sell, there will be a capital gains liability due. Farmers should seek financial advice if they wish to sell.

Read More

Full coverage: Agribusiness