Glanbia Co-op is proposing to take full ownership of Glanbia Ireland by purchasing Glanbia plc’s 40% stake in Glanbia Ireland.
This essentially means that Glanbia Ireland will be 100% owned by Glanbia Co-op and become a fully independent co-op that will be run on those principles. If approved both entities will trade under a new name.
What will it cost to do this?
The price tag is €307m. However, if you allow for €8m in transactional costs, that the plc will carry, and circa €14m of a dividend that Glanbia Ireland is not required to pay to the plc for 2021, the price tag could be described as closer to €285m.
How will it be funded?
Up to 50% of the price tag for the proposed transaction will be funded by the co-op through the sale of shares in Glanbia plc (estimated at approximately 11.5 million shares), with the balance to be funded through borrowings.
The proposed deal also includes a €168m spin-out of plc shares to co-op members. This estimation is based on Glanbia plc’s closing share price of €13.98 on 9 November 2021.,
For a member with an average shareholding this would equate to €11,028. This will vary a lot between the 11,200 shareholders. The average milk supplier has about 4,000 shares, but again this will vary within regions of the Glanbia catchment area.
Glanbia Co-op is also proposing to create an investment fund, which will be available to finance new opportunities for the co-op. There is no mention in the proposed deal of any immediate acquisitions.
This fund will be activated, when required, at a future date through the placement of up to 12 million Glanbia plc shares (value of €168 million at current share price). However, for the moment the intention is that this fund remains sitting with the plc earning a dividend.
Following the completion of the Glanbia Ireland transaction (4%) and spin-out of PLC shares to members (4%), Glanbia Co-op’s shareholding in Glanbia plc will be reduced from 32.4% (this was 31.5% prior to share buy back) to approximately 24%.
In the event that the full investment fund described above is deployed, Glanbia Co-op’s shareholding in Glanbia plc would be reduced to approximately 20%.
At the forthcoming special general meeting (SGM), the co-op board will also seek to retain the existing 3% contingency around the threshold for general business purposes, which means the floor, or threshold, for co-op shareholding in the plc will be set at around 17%.
This co-op's shareholding will also depend on what the plc does with the shares it is getting in the proposed deal. Perhaps they will cancel the shares which means the co-op shareholding in the plc could creep up above 20%.
The plan is to discuss the proposed plan with the Glanbia Council on Wednesday (10 November) and then hold a virtual special general meeting in December if it can be arranged. Wednesday's Glanbia Council meeting today was due to be an in-person event, but owing to COVID-19 guidelines it will be conducted virtually.
The timing of the virtual special general meeting may go to January depending on logistics etc.
At the special general meeting the majority required to accept the proposed deal will be 66%.
“This proposal is the latest step on our journey which began in 2012 with the creation of the strategic joint venture between Glanbia Co-op and Glanbia plc. If our members approve this proposal, we will have a very strong Co-op, with full ownership of Glanbia Ireland. We will remain the largest investor in Glanbia plc, which is focused on growing as a global nutrition company, benefiting all shareholders.
“We will have greater flexibility to support our farmers and be equipped with a dedicated investment fund to help drive higher returns in the future. Our fully independent co-op will be run on pure co-op principles with strong financial discipline, an experienced leadership team and board.
“The board have also decided that it is appropriate that all our members would benefit at this time through the distribution of a proportion of the value created by our investment in Glanbia plc.”
This follows the spin-out of a total of 36.5 million Glanbia plc shares worth over €510m* by Glanbia Co-op in 2013, 2015 and 2017. Glanbia Co-op is the largest individual shareholder in Glanbia plc, holding 93.3 million shares or 32.4% of the issued share capital of the company.
“We are very ambitious for this great business and are excited by the opportunities presented by this natural evolution to a pure co-op. It will provide greater flexibility to support co-op members, pursue new opportunities and allow us to focus on adding value to our milk and grain for the benefit of our farmers.”