Glanbia breaks spin-off silence with new JV blueprint

“Constructive discussions”​ were ongoing, Glanbia said, with a view to creating a joint venture (JV) that would result in Glanbia plc and Glanbia Cooperative Society holding 40% and 60% stakes respectively in Glanbia’s Irish dairy processing business – Dairy Ingredients Ireland.

Updating the market yesterday, Glanbia said in a statement: “Considerable progress has been made with the proposed transaction and while discussions are progressing well, it is now expected that these discussions will not be concluded before the end of August 2012.”​

As part of Glanbia’s Dairy Ireland division, Dairy Ingredients Ireland is the country’s largest dairy ingredients processor; the purpose of the spin-off is to grow this business, specifically by providing flexibility to expand milk processing capacity following the abolition of EU milk quotas in 2015.

International growth strategy​

A Glanbia spokeswoman told DairyReporter.com: "For the plc, the JV would allow Glanbia plc to continue to focus on our international growth strategy, predominantly in nutritionals. For the Society it will facilitate the desired expansion of dairy processing among members."​

She added: "Fundamentally, it's a response to the quota abolition, where a number of our milk suppliers have indicated a desire to grow - they are members and shareholders in the co-operative. So it's really about creating a vehicle to respond to that opportunity. It's a new model for growth in dairy processing essentially, properly capitalised and funded."​

Discussing the advantages of even a partial spin-off of Glanbia’s ingredients business in mid-May, NCB analyst Darren Greenfield said that it would reduce the plc’s exposure to volatile dairy markets and allow it to focus on its US cheese and Global Nutritionals business.

Glanbia announced yesterday that it was finalising an option to purchase a greenfield site in County Kilkenny from the Ireland’s Industrial Development Agency (IDA), noting that any new processing capacity earmarked for a 2015 opening required planning applications to be submitted by July.

However, any decision to develop the site was contingent on the final outcome of ongoing discussions with the Glanbia Cooperative Society, management said.

Speculation quickly arose as to how the co-operative would fund a group reorganisation that the Irish Independent​ said could cost it €200m, and involve a reduction of its 54% stake in Glanbia plc.