TIDMGLB
RNS Number : 4890X
Glanbia PLC
22 February 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Glanbia plc announces proposals to sell 60% of Dairy Ireland to
Glanbia Co-operative and create strategic joint venture Glanbia
Ireland
22 February 2017, Glanbia plc ("Glanbia" or the "PLC") and
Glanbia Co-operative Society Limited ("Glanbia Co-op" or the
"Co-op") have today announced they have signed a non-binding
memorandum of understanding ("MOU") for the sale of a 60% interest
in Glanbia's Dairy Ireland segment to Glanbia Co-op (the "Proposed
Transaction"). Dairy Ireland is currently 100% owned by Glanbia plc
and is comprised of two business units, Glanbia Consumer Foods
Ireland and Glanbia Agribusiness.
Glanbia plc and Glanbia Co-op have agreed that they intend to
form a new entity, "Glanbia Ireland", which will encompass Glanbia
Ingredients Ireland, Glanbia Consumer Foods Ireland and Glanbia
Agribusiness, as a strategic joint venture which will be 60% owned
by Glanbia Co-op and 40% owned by Glanbia plc.
Commenting today, Siobhan Talbot, Group Managing Director of
Glanbia said:
"The creation of Glanbia Ireland makes 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. With
EUR1.5 billion of annual revenue and a 2.4 billion litre milk pool,
it will be a large scale, efficient business with a high quality
supply chain and the strength and diversity to face the future with
confidence. Glanbia plc will continue to focus on its global
nutrition strategy through the platforms of Glanbia Performance
Nutrition (GPN), Glanbia Nutritionals (GN) and Strategic Joint
Ventures for the benefit of all shareholders."
Dairy Ireland
Dairy Ireland is currently a wholly owned segment of Glanbia
plc. In 2016 Dairy Ireland delivered revenue of EUR616.2 million,
EBITA of EUR30.7 million and an EBITA margin of 5.0%. Dairy
Ireland, which accounted for 10.1% of Glanbia's wholly owned EBITA
in 2016, has two main businesses, Glanbia Consumer Foods Ireland
and Glanbia Agribusiness. Glanbia Consumer Foods Ireland is the
leading supplier of branded consumer dairy products to the Irish
market, as well as an exporter of long-life dairy products. Glanbia
Agribusiness supplies inputs to the Irish agriculture sector and is
the leading purchaser and processor of grain and the leading
manufacturer of branded animal feed in Ireland. Dairy Ireland also
has holdings in a number of associates involved in primary
manufacture and distribution of farm inputs. All of Dairy Ireland's
manufacturing operations are based in the Republic of Ireland.
Proposed Transaction summary
Under the Proposed Transaction Glanbia Co-op will acquire a 60%
interest in Dairy Ireland and its related associates. Post the
completion of the proposed transaction Glanbia Ingredients Ireland,
Glanbia Consumer Foods Ireland and Glanbia Agribusiness will be
integrated to form one business, Glanbia Ireland. Dairy Ireland
would no longer be a wholly owned segment of Glanbia plc with
Glanbia Ireland being an associate investment of Glanbia plc.
Should the Proposed Transaction complete, Jim Bergin, who is
currently the CEO of Glanbia Ingredients Ireland Limited will be
appointed CEO of Glanbia Ireland.
Strategic rationale
-- The strategic rationale for the creation of Glanbia Ireland includes:
-- Building on the successful partnership between Glanbia Co-op
and Glanbia plc since the creation of Glanbia Ingredients Ireland
in 2012;
-- Integration of three strong, well invested Irish based
businesses to create value for all stakeholders;
-- As Ireland's largest milk processor, maximising the
opportunities that will be created by the expected continued growth
in milk supply in the Irish supply base of Glanbia Ireland; and
-- Creating a single platform for strategic investment. There
are currently plans for a strategic investment programme in Glanbia
Ireland of between EUR250 million to EUR300 million in the period
between 2017 and 2020. This investment programme will increase
capacity to support the stated growth ambitions of the Glanbia milk
suppliers and optimise value adding opportunities. The financing of
the investment will largely be sourced from dedicated bank
facilities in Glanbia Ireland.
Key terms of the Memorandum of Understanding
The key terms of the non- binding memorandum of understanding
(MOU) announced today are as follows:
-- At completion Glanbia Co-op will pay Glanbia plc EUR112
million for a 60% equity interest in Dairy Ireland;
-- Glanbia Ireland will acquire 100% of the working capital in
Dairy Ireland at completion financed by banking facilities ;
-- Average 3 year working capital in Dairy Ireland from 2014 to
2016 was approximately EUR92.5 million;
-- Final consideration will be dependent on the value of actual working capital at completion;
-- The Pension obligations associated with the Dairy Ireland
businesses are included in the Proposed Transaction. On an IAS 19
basis these obligations amounted to approximately EUR60 million at
financial year end 2016;
-- The new Glanbia Ireland organisation will, from 2018, have a
minimum annual profit retention policy of a profit after tax of
3.2% of net revenues which will increase over time dependent on
future value adding investments. In addition the first EUR5 million
generated in any one year above the minimum profit target will be
set aside in a volatility fund with the timing and nature of
payments from the fund at the discretion of the board of Glanbia
Ireland. Glanbia Ireland will have an annual target dividend
pay-out ratio of 50% of profit after tax.
Process, approvals and timing
-- It is expected that binding legal agreements and the
appropriate approvals relating to the Proposed Transaction will be
completed by the parties by mid-2017;
-- Glanbia Co-op plans to hold a vote of its members to approve
the Proposed Transaction with a requirement for a simple majority
of votes cast of eligible Co-op members present;
-- The Co-op will finance the Proposed Transaction with the sale
of shares it owns in Glanbia plc and existing resources;
-- Glanbia Co-op will also hold a separate vote on related
proposals which will require not less than a two thirds majority
vote of eligible Co-op members present. These related proposals
are;
o The sale of up to 3% of the issued share capital in Glanbia
plc to finance the Proposed Transaction and part finance a proposed
Member Support Fund;
o The spin out of 2% of the issued shares of Glanbia plc
currently held by Glanbia Co-op directly to its members on a pro
rata basis based upon their individual holdings in the Co-op.;
o A rule change allowing the Board of Glanbia Co-op the
discretion to further reduce the Co-op's shareholding in Glanbia
plc to 28%, as well as requiring further member approval for any
future proposal to reduce the Co-op's shareholding in Glanbia plc
below 28%.
-- The resolution to create a EUR40 million Members' Support
Fund, which is linked to all of the above proposals, requires the
approval of eligible members present by a simple majority.
-- If all of the proposals above are approved there will be a
further reduction of Glanbia Co-op's representation on the Glanbia
plc Board by one Director in 2022 taking the Co-op's total
representation on the Glanbia plc Board to 6 Directors in 2022;
-- Today Glanbia Co-op holds approximately 36.5% of the issued
shares in Glanbia plc. If all of the proposals above are approved
and executed in full the Co-op would own approximately 31.5% of the
issued share capital in Glanbia plc;
-- In addition, as the joint venture transaction is between
related parties it will require the approval of Glanbia
shareholders at a general meeting, excluding the Society and its
associates.
-- Subject to completion of legal contracts and receipt of all
necessary approvals, expected completion date is mid-2017.
Valuation summary Dairy Ireland
The agreed equity value for 100%
of Dairy Ireland net of pension
liabilities and working capital EUR186 million
-------------------------------------------- ---------------
The agreed equity value for 60%
of Dairy Ireland net of liabilities
and working capital payable at completion
of the Proposed Transaction EUR112 million
-------------------------------------------- ---------------
Note final consideration will be the sum of the total value of
the 60% equity interest in Dairy Ireland plus the value of 100% of
the working capital in Dairy Ireland at completion.
Use of proceeds
If the Proposed Transaction completes, all consideration will be
settled in full with cash and Glanbia plc intends to initially use
the proceeds from the sale to pay down existing debt.
Further updates
If and when final binding legal agreements relating to the
Proposed Transaction are signed, Circulars relating to the Proposed
Transaction will be published and sent to the Shareholders of
Glanbia plc and Glanbia Co-op. These documents will contain the
details of the key terms agreed between Glanbia plc and the Glanbia
Co-op and provide notice of the EGM. Note final terms may vary to
those outlined in this announcement.
Advisors
Advisors to Glanbia PLC : Corporate finance advisor: IBI
Corporate Finance, Sponsor: Davy Corporate Finance and legal
advisor: Arthur Cox
Advisors to the Society: Corporate finance: EY and legal
advisor: William Fry
S
For further information contact
Glanbia plc +353 56 777 2200
Investor contact:
Liam Hennigan, Head of Investor
Relations: +353 86 046 8375
Media Contact:
Mark Garrett, Director of Communications
& Public Affairs: +353 86 601 9655
About Glanbia plc
Glanbia plc is a global nutrition company, grounded in nature
and science dedicated to providing better nutrition for every step
of life's journey.
Glanbia has deep roots in the dairy industry and has become the
world's leading producer and marketer of quality performance
nutrition products supporting active lifestyles. Its success as a
global ingredients provider has been built on Glanbia's expertise
in nutritional solutions supported by significant investment in
research and development.
With total group turnover of almost EUR3.7 billion per annum in
2016, over 6,000 employees and a presence in over 32 countries
worldwide, Glanbia's vision is to be one of the world's top
performing nutrition companies, trusted to enrich lives every
day.
About Glanbia Co-operative Society Limited
Glanbia Co-operative Society Limited is Ireland's largest and
most valuable Co-operative, with 14,773 members. Glanbia Co-op is
the largest individual shareholder in Glanbia plc, today holding
approximately 36.5% of the issued share capital of Glanbia plc.
Glanbia Ingredients Ireland (GII)
Glanbia Ingredients Ireland is a 60:40 joint venture between
Glanbia Co-operative Society Limited and Glanbia plc. It is the
largest dairy processor in Ireland, processing a total of 2.2
billion litres of milk per year with approximately 700 employees
and sales revenue of over EUR836 million in 2016. Its products, the
large majority of which are exported to more than 60 countries,
include milk powders, butter, cheese, whey protein, milk protein
and casein. Its customers include many of the large global food and
infant formula manufacturers as well as more regionally focused
players across Europe, Middle East, Africa and Asia.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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