FDBusiness.com

Glanbia plc  and Glanbia Co-operative Society Limited have signed a non-binding memorandum of understanding for the sale of the PLC’s 40% interest in Glanbia Ireland DAC to Glanbia Co-op for a purchase price of €307 million. Glanbia Ireland is the largest milk processor and grain buyer in Ireland, producing a range of value-added dairy ingredients and consumer products as well as selling farm inputs. Glanbia Ireland operates 11 processing plants, 52 agri retail branches and has over 2,000 employees.

In the 2020 financial year on a 100% basis, Glanbia Ireland generated €1,906.2 million in revenue and a profit after tax of €60.0 million. Glanbia Ireland contributed €23.9 million to the share of results of Glanbia equity accounted investees in the 2020 financial year, equating to approximately 8.5 cent of PLC adjusted earnings per share.

Donard Gaynor, Chairman of Glanbia plc, said: “Glanbia Ireland has a successful heritage, and for many years we have valued the partnership with Glanbia Co-op in creating a strong business under our joint stewardship. This is the right time for the Proposed Transaction. The Co-op is the right owner to continue the strategic development of Glanbia Ireland for the benefit of the Co-op’s members, and the PLC can continue to maximise the opportunities for its own business in the post-Covid environment, with our focus on health, wellbeing and nutrition.”

Siobhan Talbot, Group Managing Director of Glanbia plc, said: “The announcement represents the next stage of our transformation journey following many years of successful collaboration with Glanbia Co-op as joint venture partners in Glanbia Ireland. If approved, the Proposed Transaction will continue the alignment of our portfolio to our strategy, which is focused on driving growth through our market leading positions as a brand owner and ingredient solutions provider, playing into strong underlying consumer health and wellness trends. We expect to deploy the capital received from the Proposed Transaction in investment to drive further growth and to return capital to shareholders.”

Strategic rationale and use of proceeds

The Proposed Transaction is consistent with the PLC’s strategy to focus on its two growth platforms, Glanbia Performance Nutrition (“GPN”) and Glanbia Nutritionals (“GN”), as well as strategic joint ventures. The PLC will increasingly focus on its global nutrition strategy as a brand owner and provider of value added nutrition solutions, serving high growth markets.

The proceeds from the proposed transaction will be primarily invested in growth opportunities with up to 50% of the proceeds being returned to shareholders via a share buyback.

Key terms

The Proposed Transaction is subject to the execution of binding legal agreements between the PLC and the Co-op.  Key terms from the MOU are as follows:

• Transaction consideration fixed at €307 million, expected to be paid in cash, and not subject to any adjustment mechanisms post completion. If the Proposed Transaction completes, GI is not required to pay any dividend to the PLC in respect of the 2021 financial year or otherwise, prior to Completion;
• GI and the Co-op will change their respective names following a transitional period post completion to names which do not include “Glanbia”;
• The PLC will fund costs of €8 million to be incurred by GI, related to pension obligations, separation and rebranding costs in connection with the Proposed Transaction;
• Post completion of the Proposed Transaction certain corporate, business and IT services will continue to be provided by the PLC to GI for a defined period;
• GI will maintain certain commercial arrangements with the PLC for the sale, purchase and agency of various products until the GI name change has been implemented;
• Within one year of completion of the Proposed Transaction, all amounts owed by GI to the PLC in respect of an existing shareholder loan of €28.8 million will be satisfied, (which repayment is in addition to the consideration payable for the Proposed Transaction);
• On or before completion of the Proposed Transaction all PLC representatives on the Boards of GI and the Co-op will retire; and
• Effective immediately the PLC Group Managing Director will retire from her positon on the Board of the Co-op.

Process, approvals and timing

• Subject to appropriate board approvals, it is expected that binding legal agreements relating to the Proposed Transaction will be executed by the parties by early 2022;
• As the Proposed Transaction is between related parties, in accordance with the Euronext Listing Rules and UK Listing Rules, the binding legal agreements relating to the Proposed Transaction  will require the approval of the PLC’s shareholders, excluding the Society and its associates, at an extraordinary general meeting (“EGM”);
• Glanbia Co-op plans to hold a vote of its members (“SGM”) to approve the Proposed Transaction and related proposals; and
• Subject to execution of legal contracts and receipt of all necessary approvals, including any applicable regulatory approvals, completion of the Proposed Transaction is expected to occur in the first half of 2022.

Coop financing

Glanbia has been informed by the Co-op that it intends to finance up to 50% of the Proposed Transaction through the sale of shares it owns in the capital of the PLC, with the balance to be funded through borrowings.

Furthermore the Co-op intends to transfer via a spin out to its members up to 12 million shares it owns in the capital of the PLC. These proposals will be subject to a Co-op member vote at its SGM.

Further updates

If and when final binding legal agreements relating to the Proposed Transaction are signed, a Circular relating to the Proposed Transaction will be published and sent to the shareholders of the PLC. This document will contain the details of the key terms agreed between the PLC and the Co-op and provide notice of the EGM. Note final terms may vary to those outlined in this announcement.