What you need to know about the Kerry deal

Both Kerry Group and Kerry Co-op have issued information on the proposed joint venture.

Lorcan Roche Kelly

12 November 2024

What you need to know about the Kerry deal

Kerry Co-op said it would acquire “the region’s processing assets together with valuable consumer brands”. \ Philip Doyle

The proposal for a 70:30 joint venture between Kerry Co-op and Kerry Group will be put to a vote of the co-op’s A and B shareholders at 12pm on 16 December.Under the proposed transaction, all shareholders will be offered an exchange of Kerry Co-op shares for Kerry plc shares at a rate of 6.25 shares per co-op share held.

The proposal for a 70:30 joint venture between Kerry Co-op and Kerry Group will be put to a vote of the co-op’s A and B shareholders at 12pm on 16 December.

Under the proposed transaction, all shareholders will be offered an exchange of Kerry Co-op shares for Kerry plc shares at a rate of 6.25 shares per co-op share held.

Some 15% of that exchange will be used, along with additional borrowings, to acquire Kerry Dairy Ireland.

Effectively, this means that every Kerry Co-op share will be worth 5.3125 (6.25 multiplied by 0.85) Kerry plc shares and one new Kerry Co-op share.

The exchange should have no tax implication for Irish residents, as it would be treated as an asset swap - similar to what happened in the recent Tirlán share spin-out.

Processing assets

Kerry Co-op said it would acquire “the region’s processing assets together with valuable consumer brands”. Kerry Group said this would include seven production facilities and 1,500 employees.

Following the transaction, the co-op would cease to be a shareholder in Kerry Group.

The 15% share currently has a value of approximately €251m, so the balance of the initial €350m purchase price would be funded by a €56m bank loan and a loan agreement with Kerry Group.

The final size of the loans would be determined based on the value of the Kerry plc shares at the time of the transaction.

Kerry Co-op can buy the remaining 30% of the joint venture any time from the completion of the agreement until 31 July 2030.

For a five-year period after that, Kerry Group can require Kerry Co-op to buy out the 30% share. Kerry Co-op said funding for that €150m purchase would come from a “mix of equity and retained cash”.

The co-op said it would provide more information on its website.

'Best opportunity'

Chair of Kerry Co-op James Tangney said: “The proposed transaction is transformational in nature and has been approved by the board.

"We believe the proposal being put to members will satisfy the diverse aspirations of our shareholder base and believe it offers the best opportunity for Kerry Co-op to move forward in a new direction with confidence.

"Over the coming weeks, Kerry Co-op will engage extensively through a series of local meetings with members so that they can make an informed decision at our upcoming special general meeting on Monday 16 December in the Gleneagle INEC Arena, Muckross Road, Killarney, Co Kerry, at noon.”

Kerry Group said the proposed transaction is expected to be completed by the end of January 2025. Kerry will be entitled to a fixed dividend of €7.5m per annum during the period of the joint ownership.

In its announcement to the stock exchange on Tuesday morning, Kerry Group said that the transaction would not lead to any new shares in the plc being issued.