I’m not going to comment on anyone who speculates on a valuation,” Jim Woulfe, strategic advisory to the board of Kerry Co-op told the Irish Farmers Journal in an exclusive interview with himself and Co-op chair James Tangney.

“We’ve been through the numbers, EY have done all the financial analysis that needs to be done,” he explained, adding that the valuation was made with reference to other deals around the world, and by breaking out Kerry Dairy Ireland’s different business lines and arriving at a “blended EBITDA multiple” of just over seven times.

“The board have been very much involved in this valuation exercise from the get go,” Woulfe said.

When pushed on the possible business challenges facing Kerry Dairy Ireland, Woulfe said that there is downside protection for Kerry Co-op.

“If 2025 performance exceeds the target, then there is no upside for Kerry Group, but if there is downside, then there is downside correction from the point of view of valuing the business.

“The other risks in this situation are the milk pool, the nitrates, the carbon and all that go with that space,” Woulfe said, adding that it is heartening that the forecast for Kerry Dairy Ireland’s milk volume in 2024 is that it would only be down “half of one per cent.”

Looking at the way the deal is structured, it is clear that the majority of shareholders in the new Kerry Dairy Ireland joint venture would be so-called “dry” shareholders, who hold B and C shares in Kerry Co-op.

When asked about how they might be able to get their money out of the enterprise in future, Tangney said that “definitely, without a doubt, a redemption scheme would have to be put in place for these people down the road because through probate, it is vital that it is put in place”.

“It is a commitment we will be looking at, and it will be put in place,” he emphasised.

Looking to the future, Tangney admitted that there might be tie-ups or closer co-operation with other processors. “All co-ops have got bigger in the past, and down the road, obviously with the power of scale, it is something that will definitely have to be looked at. But it is not a priority at present.”

Tangney also emphasised the change for milk suppliers that would come from the transition for Kerry Dairy Ireland from being a plc-run to a co-op-run organisation. “We’re doing it for the shareholder side, we’re doing it for the milk suppliers.”

“Going forward, it will be about milk price.”

Tangney admitted that the business needs to regain the trust of farmers which was lost during the disagreements around the leading milk price and the arbitration.

“The milk suppliers are the engine of this business and we need to bring them with us,” he said.

When pushed on whether he is confident on whether the new business can pay a leading milk price, he said: “I’m very confident.”

Tangney’s parting comments were to encourage shareholders to turn up to vote in Killarney. “It is absolutely vital that people turn up,” he said. “We need people to vote, we need a mandate from people.”

With only days to go ahead of the shareholder vote on the proposal for Kerry Co-op to commit to the takeover of Kerry Dairy Ireland, there has been no shortage of presentations, meetings and newspaper column inches given over to it. This all means those shareholders should have a good idea of what they are voting on.

We have seen and heard from both sides over the last few weeks, with one side convinced it is a good deal, while others are sure there is a better deal to be had from voting no.

Obviously, it would be better for milk suppliers to get the processor as cheaply as possible. It would be better if there were no dry shareholders coming with the new business. For those dry shareholders, it would be better if they were getting 100% of their shares out, rather than leaving 15% behind in an extremely illiquid investment that could cause headaches further down the line - around either getting their money back or through a potential inheritance tax liability.

It would be better if the co-op were buying 100% of the business from the get go, rather than having Kerry Group hanging on and taking dividends for up to the next decade.

But, everyone voting in Killarney has to vote on the proposal that is in front of them, rather than what they wish it could be. We certainly agree with Tangney on one thing – and that it is of vital importance that as many shareholders as possible do vote.

Whatever the result, a high turnout will mean the result will reflect the views of the people who really get to make the decision on the future of Kerry Co-op.

Listen to the full interview on the Kerry vote podcast here.