Kerry Co-op: a fraught decade

Kerry Co-op has had a chequered relationship with Kerry Group (the plc) over the last decade. Here is a quick explainer of the key moments and players.

August

The co-op met to consider reducing its shareholding in Kerry Group, which it had formed in 1986, to below 20%. At a crucial meeting of shareholders, Stan McCarthy gave a commitment on milk price.

He did this because the reduction in shareholding would effectively end the co-op’s influence in the boardroom of the plc, and thus end any semblance of control that Kerry suppliers would have in determining milk price.

Exactly what was said – “a leading milk price” or “the leading milk price” – and exactly what was meant has become a source of dispute ever since.

After years of rumblings over milk price, things finally came to a head. Kerry Co-op chair James Doyle sought arbitration in regard to the milk price paid for 2015. Arbitration is a formal and complex process; it would take years.

May

Deteriorating relations over, among other things, the milk price that was being paid to farmers, led to Stan McCarthy leaving his role as CEO of Kerry Co-op. At some point in the following months, Brian Durran, who had been serving as secretary of both Kerry Group and Kerry Co-op, left the co-op role.

Kerry Group continued to provide management of the co-op’s fairly minimal activities.

The co-op shareholder register remained under Kerry Group’s control until very recently.

November

Co-op chair James Doyle was unseated from the board in his own advisory electoral area, and had to step down as chair.

November

Parallel to all this, 3,500 Kerry suppliers received letters from Revenue announcing that preference shares they had received would be treated as income.

James Doyle was brought back in to help fight the case against Revenue.

On this occasion, the co-op and the Kerry Group were as one in the battle against Revenue.

December

Mundy Hayes is elected as co-op chair.

February

Change at the top continued. Stan McCarthy announced that he would step down as Kerry Group CEO in September. Edmond Scanlon, a Kerry native, but who had spent most of his time abroad in the US, China and Singapore, would succeed him.

October

Kerry Co-op appointed Thomas Hunter McGowan as its CEO. Since Stan McCarthy and Brian Durran’s departures, there was a serious management vacuum in a co-op with about €2bn in funds, almost all of that plc shareholding.

A group calling themselves the Shareholders Alliance emerged. Comprised of a mix of active and former dairy farmers and some non-farming investors in Kerry Co-op. They sought the full liquidation of the co-op, with some wealth set aside to help set up and fund a new co-op. This, they said, would minimise the tax liability of shareholders.

June

The co-op introduced a Share Redemption Scheme, which offered society members an opportunity to cash in on some or all of their shareholding.

For each share surrendered, a fixed number of plc shares would be sold by the co-op, with the proceeds passed back.

The ratio decided upon was 5.9 plc shares to each co-op share, with €619.50 paid for shares surrendered in the first such event.

This system saw the surrender of shares also treated as an income tax rather than a capital gains tax matter.

That suited smaller shareholders better, but not those with very large shareholdings. It also gave a much better payment than the “grey market” ever had.

The “grey market” is a system where a person sells their co-op shares to a third party, with the approval of the co-op board required for each transaction.

November

The arbitrator published his findings on the “leading milk price” case.

While both sides claimed victory, the complex judgement gave legitimacy to the co-op’s claims that “leading milk price” should mean Kerry matched the best price paid by any Irish co-op.

The two sides continued to dispute the exact status of perennial milk-price chart toppers Carbery.

Kerry Group argued that their structure, with four individual co-ops supplying the “mothership”, meant Carbery could not be an exact comparison.

The co-op said this was not relevant.

The arbitrator instructed both sides to meet to negotiate an agreed settlement related to his findings.

March

Talks between the co-op and the plc over a possible joint venture collapse, with over €100m of a gap between the estimation of the value of the Irish dairy and agribusiness.

April

A group of shareholders begin collecting signatures with the intention of petitioning for an SGM to force the co-op to consult shareholders before making any significant business acquisition.

December

Denis Carroll is elected as chair of Kerry Co-op to replace Mundy Hayes.