This week Glanbia announced it will be holding the Special General Meeting to decide on co-op ownership of Glanbia Ireland online and voting will also be online.

This model had been expected since the announcement of the proposed deal on 10 November, but this week’s notice confirms that.

The meeting will be the biggest meeting and vote of its kind online in the dairy space since the COVID-19 pandemic took hold.

However, the technological capacity is there and just because the biggest meeting so far was in the hundreds doesn’t mean thousands can’t participate.

As the deal settles in and while the Glanbia Council unanimously voted to support the proposals this week, some have been asking more questions around the funding of the deal.

The exact mix of the funding model will depend on share price and what is realised by selling plc shares and what level of debt or cash reserves needs to be used in the deal.

When the deal was announced, the shares were worth €14 each, but now the market values them at €11.50, so selling about 12 million shares won’t give you the same money. If the decision is not to sell more shares, then the gap in funding must come from somewhere else.

How the stock market reacts to news like what I term an ‘internal company share restructure’ varies. Some investors see the share sale as a negative on share price in the short term as more shares on the market potentially dilutes the value depending on the buyer appetite. Some would see it as a positive that a large shareholder is reducing its stake.

To bring clarity to this, the Glanbia Co-op chair John Murphy issued a statement yesterday. He said the co-op could have completed the deal without selling the plc shares using cash and debt. This is an effort to explain what might have been the perception that the co-op might have had to sell plc shares regardless of share price.

What I take from the John Murphy quote this week is the following. The reality is shareholders on 17 December will be asked to give authority to sell down the co-op threshold in the plc from 28% to 17%. That’s the fact. How Glanbia co-op funds the €285m deal then is for Glanbia co-op to decide. If it does get the nod, it might not sell the shares if the price is too low.

So when you look at this deal – the valuation, the ownership, etc – the co-op wants 100% ownership of Glanbia Ireland, but the plc wants to reduce the shareholding of a large shareholder as this would or should bring clarity and less risk to the plc share price.

This has been happening down in Kerry for the last number of years. Company investors prefer when one large shareholder has less influence or potential influence on share price or investment.

On the investment fund this week, the chair reiterated what has been said already – they have nothing immediate to invest in and the threshold return, or bar for any investment, will be what return they can get from the plc dividend.

The investment fund is a 4% sale of plc shares to create an investment fund (€140 to €170m dependent on share price) for the new Glanbia Ireland.

Some farmers are concerned that this is a bit loose or in effect too much power to give any board, even if they have the best intentions.

Some farmers would say let them run the business well, create an investment fund from surplus annual reserves and the board have full control of that without needing to sell more plc shares to create a lump sum from a share sale.

I think shareholders deserve either more detail or specific measures on this investment fund piece. The management of the fund and the decisions it makes are big moves.

  • Shareholders must register to vote by 14 December.
  • Voting on this proposal and a series of related resolutions will take place at an SGM of Glanbia Co-op on Friday 17 December at 2pm.
  • The meeting and voting will take place online
  • At the SGM, the co-op board will seek the approval of eligible A1, A2 and A4 members present, by a simple majority, for the proposal to acquire Glanbia plc’s 40% interest in Glanbia Ireland. Given what we have heard, this should get the nod no problem and to get over 50% should not be a problem.
  • Glanbia Co-op will also hold votes on related proposals that will require not less than a two-thirds majority vote of eligible co-op members present, including two-thirds of members classified as active milk suppliers. Those proposals are:

  • The replacement of the current threshold for Glanbia Co-op’s shareholding in Glanbia plc of 28% of the issued share capital, with a rule whereby the board of the co-op will not take any action to reduce the co-op shareholding in Glanbia plc to below 17% of the plc issued share capital without member consent. This authority will permit the new board to proceed to create a pot of money it can spend on buying the plc stake in Glanbia Ireland, a spin-out of money to shareholders and the creation of an investment fund for what they deem is the right investment.
  • There are other votes related to approval of changes to strengthen the governance of the co-op, including the ability to add independent directors to the co-op board and the chair being elected every two years rather than annually at present.
  • A proposal to create a 2022 member distribution reserve, which is linked to all of the above proposals, will require the approval of A1, A2 and A4 members present by a simple majority. This reserve will govern the future distribution of the society’s income sources (net of administration and finance costs).
  • A separate proposed new rule provides flexibility to the board to pay interim share interest (dividends) to members, should they deem it appropriate to do so.
  • If all this happens and is successful, then the plc will hold an extraordinary general meeting (EGM) next year to ratify the move.
  • Glanbia plc updated investors on the sale of Glanbia Ireland on Wednesday morning.

    In a statement, it noted that it had been informed by Glanbia Co-op that it is in a position, if necessary, to fund the proposed transaction through a combination of existing cash resources and debt facilities. The proposed transaction is not contigent on the sale of the plc shares by the co-op.

    The co-op had planned to fund about 50% of the €285m transaction through sale of shares in Glanbia plc (about 11.5 million shares).

    Glanbia’s share price has fallen by almost €2.60(18%) in the three weeks since it announced the sale. The share price has fallen from €13.98 on 9 November to €11.41 at closing on 30 November.

    News of the emergence of the Omicron variant of COVID-19 has dealt a blow to stock markets across the world this week. Glanbia’s share price fell by 4% from closing on Friday (€11.90) to €11.41 at closing on Tuesday 30 November.

    Kerry Group’s share price fell almost 6% in the same period while the ISEQ Index of Irish shares was down 8%.

    The share price has traded in the range of €9.74 to €15.25 over the past 12 months, peaking in August coinciding with the plc share buyback programme.

    The Irish Farmers Journal reported last week of emerging resistance to the proposed deal from some farmers, citing, among other things, concerns about the value of the deal as share price falls.

    The proposal to sell approximately 11.5 million shares to fund the deal would result in €30m less in funding being generated from the sale based on the 30 November share price when compared to the reference price of €13.98 from 9 November in the Glanbia Co-op announcement.

    Statements from Glanbia Co-op this week are seen by analysts as an attempt to ease fears regarding the scale and timing of share sales which they believe is overhanging the market and weighing on share price. It remains to be seen how the market reacts and if the share price rebounds.

    Without the sale of plc shares, Glanbia Co-op has a number of financing options available to it: increased debt finance, utilising existing cash resources, seeking funding from farming members or a combination of all three.