Kerry co-op poised to make their move

I see Kerry Co-op has written to shareholders with a clarification around the tax implications of a spin-out.

I understand that it is also preparing a communication informing and consulting re proposal options. My information is that the board has three objectives “agreed and signed-off by the board in 2017”.

They are that the co-op should continue as an entity, should be relevant to its members and should have liquidity in its shares.

In other words, the board has no intention of dissolving the co-op, but will provide an avenue for members to at least partially realise the see-through value of their shares.

Of course, there has always been the opportunity for people to sell co-op shares at far above their face value on the “grey market”. There seems to be a real issue around the current makeup of the co-op’s activity (or lack of it) and the demography of its shareholders in terms of finding a tax-efficient way to transfer wealth to the shareholders.

The co-op has the option to buy the agribusiness from the plc, an option that must be exercised by next January. This does not include milk processing assets.

If the board is serious about acquiring milk processing, it must either bid for Kerry’s assets or break from them and seek a strategic partner among the co-ops.

Existing milk supply contracts make the latter option a long-term and difficult one.

Relations between the co-op and plc would make negotiations to buy the Irish dairy business extremely difficult, although Glanbia is proof it can be done.

And a group of shareholders are considering calling for an EGM to consider the dissolution of the co-op. They need 20% of shareholders to sign a petition to achieve that goal.

Remember, this comes in advance of the arbitration over the 13th payment, the issue that drove such a wedge between the Kerry Co-op board and the plc. It starts on 5 September and could go on for 10 days.

Kerry chair Mundy Hayes is in a similar position to Theresa May in some ways. They both lead a co-op/party with deeply divided views on what the future should look like. They have to negotiate a divorce from a bigger entity that can seem condescending, and they are working against the clock. Not simple.