Glanbia plc said the proposed transaction is consistent with its strategy to focus on its two growth platforms, Glanbia Performance Nutrition (GPN) and Glanbia Nutritionals (GN), as well as strategic joint ventures. The PLC said it 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.
The transaction is subject to the execution of binding legal agreements between the PLC and the Co-op. The transaction consideration is fixed at €307m, is expected to be paid in cash, and is 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 that do not include Glanbia.
The PLC will fund costs of €8m ($9.2m) 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 €28.8m ($33m) 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 position on the board of the Co-op.
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 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.
Glanbia Co-op plans to hold a vote of its members 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.
Glanbia has been informed by the Co-op 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.
The Co-op also intends to transfer via a spin out to its members up to 12m shares it owns in the capital of the PLC. These proposals will be subject to a Co-op member vote at its SGM.
Glanbia Ireland is a joint venture owned 60% by Glanbia Co-op and 40% by the PLC. GI 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. GI operates 11 processing plants, 52 agri retail branches and has more than 2,000 employees.
In the 2020 financial year on a 100% basis, GI generated €1.906bn ($2.2bn) in revenue and a profit after tax of €60.0m ($69m).
GI contributed €23.9m ($27.5m) 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 maximize 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, “Today’s 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.”