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Glanbia is to sell 60 per cent of its dairy business to its co-operative, giving farmer members majority control of Ireland’s largest milk processor – a move that farmer shareholders blocked when the public company attempted it in 2010.
The co-op will pay €112m for a 60 per cent stake in the dairy business, with the 40 per cent balance retained by the public company.
The spin off will be financed by the co-op approving the disposal of part of its 36.5 per cent stake in Glanbia.
The deal has to be approved by a simple majority of co-op members present at an EGM.
The co-op will hold a separate vote on a proposal for 2 per cent of Glanbia shares currently held by the co-op directly to be distributed to individual farmer members – in a bid to sweeten the deal.
To allow for future dilution of the co-op stake, co-op members will also be asked to vote to give the Glanbia board discretion to reduce the co-op shareholding to 28 per cent.
It is far from certain Glanbia will secure farmer approval for the proposals. In 2010 a similar package was voted down by farmer shareholders.
The company, which was created by the 1997 merger of the Avonmore and Waterford milk cooperatives, is one of a number of Irish companies which has origins in the Irish co-operatives movement. Kerry Foods has a similar structure.
But the relationship has been problematic with tensions between the co-op, which wants to protect milk prices for its members, and the goal of maximising profits for the public company.
Sobhan Talbot, managing director of Glanbia, said the latest deal offloading majority control of its milk business to the co-op made “strategic sense for the shareholders of both Glanbia Co-op and Glanbia plc. It brings together in a single structure the ownership, operations and objectives of Glanbia’s Irish dairy and agri-businesses.”