Kerry quandary for Limerick milk suppliers on proposed €500m deal
Kerry Group reaches agreement to sell dairy division to Kerry Co-op
KERRY suppliers in Limerick who checked their phones after milking the cows on Tuesday morning probably saw a lot of messages and alerts about the board of Kerry Co-op reaching a deal with Kerry Group to buy its consumer foods products and dairy ingredients business.
The proposed transaction is for Kerry Co-op to buy Kerry Dairy Ireland in two stages for up to €500m – 70% before the end of January 2025 and 30% in the period up to 2035.
Neither the IFA or ICMSA have commented at the time of going to print but the move is understood not to be popular amongst the Limerick suppliers. There are a number of legacy issues including the contentions leading milk price issue. Farm Leader understands that dissatisfaction among some Kerry milk suppliers in Limerick extends so far that they are considering switching co-ops when their contracts with Kerry end.
Returning to Tuesday’s news, to facilitate the proposed transaction, the co-op is recommending to its members a share exchange whereby all co-op members will be given new Kerry Group shares in exchange for 85% of their co-op shareholdings; at a rate of 6.25 Kerry Group shares per co-op share currently held.
“For Irish resident individuals, there should be no upfront tax charge as a consequence of this transaction, and any tax on capital gains should only become payable in the event of a subsequent sale or transfer of the Kerry Group shares concerned,” reads a statement issued on behalf of Kerry Co-op.
The Kerry Group shares held by Kerry Co-op (circa15%) will be re-invested, with additional borrowings, to acquire Kerry Dairy Ireland in two stages, in which all co-op members will participate, retaining all current rights in the same proportions as A, B and C shareholders of the co-op.
Acquiring Kerry Dairy Ireland will give the co-op ownership and control over the region’s milk processing assets, together with valuable consumer brands, which are critical to securing the future of dairy farming families in the region.
The proposed transaction will only proceed if approved by the requisite majority of the co-op’s A and B shareholders present at a special general meeting (SGM). This SGM will be convened at the Gleneagle INEC Arena, Killarney, Kerry at 12 noon on Monday, December 16.
A member information brochure providing details on the proposal is available on the Kerry Co-op website (www.kerryco-op.com) and is being distributed to members over the coming days. The proposed transaction is also subject to the approval of shareholders of Kerry Group.
Commenting, James Tangney, chairman of Kerry Co-op said:
“We are very pleased to have reached an agreement that will ultimately deliver full ownership of one of the leading dairy businesses in the country, while also, in effect, releasing circa 85% of Kerry Co-op’s Kerry Group shares into the hands of our members to be retained or sold by each of them at a time of their choosing.”
Mr Tangney continued: “Kerry Co-op and Kerry Group have a shared heritage that has helped create value, pioneer change and shape the dairy industry, but we have come to a fork in the road where both organisations require the freedom to grow in a manner best suited to the needs of their stakeholders. As direct shareholders in the plc, members will continue to gain from the group’s progress and, in tandem, the co-op will focus on ensuring Kerry Dairy Ireland becomes a platform for future growth. It will also give farmers a greater voice in a business that is critical to their farming futures.”
One Limerick dairy farmer said this is “going to run and run”.
As a current business division of Kerry Group, Kerry Dairy Ireland is a leading dairy and ingredients business.
It is rooted in a rich agricultural heritage, processing over 1.1 billion litres of milk annually from 2,740 family farms across Munster and especially Kerry and Limerick after the acquisition of Golden Vale.