Glanbia to Sell Dairy Unit to Co-operative Society
The Irish Dairy and Agri Businesses comprise three principal business units, Dairy Ingredients Ireland, Consumer Products and Agribusiness, as well as Glanbia Estates, Group Business Services and Irish Joint Ventures and Associates.
20 Apr 2010 --- Glanbia plc, the international nutritional ingredients and cheese group, has conditionally agreed to dispose of its Irish Dairy and Agri Businesses to Glanbia Co-operative Society Limited, its 54.6 per cent shareholder. The Disposal is expected to be completed no later than 15 June 2010.
The Irish Dairy and Agri Businesses comprise three principal business units, Dairy Ingredients Ireland, Consumer Products and Agribusiness, as well as Glanbia Estates, Group Business Services and Irish Joint Ventures and Associates.
The Disposal Proceeds comprise the proceeds of the placing of 102 million Glanbia shares held by the Society, adjusted by the Risk Sharing Adjustment as described below and cash of €49.7 million.
Glanbia and the Society have agreed a risk sharing mechanism in relation to the Placing Value. The Placing Value will be adjusted by an amount equal to one half of the difference between the Net Placing Price (the proceeds of the Placing, net of all costs, calculated as a per share amount) and €2.65 multiplied by 102 million shares. To the extent the Net Placing Price exceeds €2.65, the Placing Value will be adjusted downwards; to the extent the Net Placing Price is less than €2.65, but greater than €2.25, the Placing Value will be adjusted upwards.
The Disposal Proceeds will be subject to a euro-for-euro working capital adjustment reflecting the difference between the level of working capital in the Irish Dairy and Agri Businesses at completion and €75.3 million. Based on the normal working capital cycle for the Irish Dairy and Agri Businesses, working capital at Completion is expected to be approximately €150 million which would result in a Working Capital Adjustment of approximately €74.7 million.
During September 2010, the Society intends to transfer circa 50 per cent of its remaining shareholding directly to members, representing 28.5 million shares. This will result in a Society shareholding in Glanbia plc of circa 10 per cent.
The Society will undertake all employment obligations in relation to the employees of the Irish Dairy and Agri Businesses and the full obligations as the sponsoring employer of the relevant Irish pension schemes relating to these businesses. As of 2 January 2010, these pension schemes showed a pension deficit of €48.7 million on an accounting IAS 19 standard basis.
The transaction is conditional in the first instance upon the approval of the members of the Society. In addition, completion of the Disposal is conditional on the approval by shareholders of Glanbia plc (excluding the Society and its associates) of the Disposal in accordance with the Listing Rules. The Disposal is also conditional upon the completion of the Placing.
Since the beginning of the year the improvement in the Group's operating environment continues. This is benefiting Glanbia's performance overall and, combined with an ongoing cost reduction focus and operational excellence, is expected to deliver a marked improvement in the first half, mainly as a result of a recovery in Dairy Ingredients Ireland. This compares with an exceptionally difficult first half in 2009.
John Moloney, Group Managing Director of Glanbia plc said: "In a changed global dairy market environment, the time and opportunity is now at hand to recognise and embrace the need for transformation. This transaction provides the prospect of reshaping the business and unlocking growth and development potential for both the Society and the Company. For Glanbia it has compelling strategic logic and creates a focused business with a well established growth strategy, underpinned by improved financial flexibility. For the Society, achieving full control of the Irish Dairy and Agri Businesses, will create a dynamic organisation focused on driving growth and development for farmer members."
Liam Herlihy, Chairman of the Group and the Society said: "The last few years have demonstrated that global dairy markets and the Irish dairy sector are in a period of profound change. A unique opportunity exists for the Society to build a new strategy, structure and business model that best serves the interests and needs of our members. In particular, there is an exciting opportunity to expand Irish milk output in the context of emerging changes in EU regulation of the industry. Gaining ownership and control of key strategic Irish assets puts members in an excellent position to capitalise on these changes and the Board of the Society looks forward to the successful completion of this transaction and to building a sustainable future for all our members."
