Glanbia in talks on sale of dairy business to co-operative

GLANBIA HAS entered negotiations with the Glanbia Co-operative Society, its 54 per cent shareholder, about the sale of the company’s Irish dairy and agri businesses to the co-operative.

If the deal is passed, the food conglomerate’s dairy processing, consumer products and agribusinesses in Ireland will be 100 per cent owned by the co-operative.

Glanbia’s Irish property businesses and related joint ventures in Ireland would also be included in the sale.

While the company declined to give any indication of a possible valuation figure for the Irish dairy business – which represents approximately 50 per cent of the company’s revenue stream – it is likely that the co-operative will fund the takeover through the sale of a percentage of its shareholding in the public limited company.

Such a co-operative move would involve a “significant reduction in the Society’s ownership in the group”, according to Glanbia. Analysts estimate that this would involve at least 35 per cent of the company coming on to the market.

Credit Suisse is advising Glanbia on the transaction while KPMG Corporate Finance is acting for the co-operative.

It is expected that an agreement may be reached in the next four to six weeks, with a deal closed by the end of the second quarter.

Yesterday’s announcement came as the Kilkenny-headquartered company posted a fall in profit and revenue for 2009 in line with guidance.

Pre-tax profit fell 19 per cent to €97.4 million in the year ended January 2nd, 2010, while revenue slipped 18 per cent to €1.8 billion over the same period.

Chief executive John Moloney said it was a “solid” performance by the group, in line with expectations, despite the challenging trading environment.

Adjusted earnings per share were down 14.4 per cent to 30.68 cent, while dividends were increased by 5 per cent to 6.84 cent per share.

A breakdown of the results shows that revenue at the company’s Irish dairy division fell by 23 per cent in the year to just over €1 billion with operating profits down by more than half to €24 million.

Revenues at the US Cheese and Global Nutritionals business was 6 per cent lower in the year at €792.4 million, but operating profits rose by more than 7 per cent in the year to €90 million.

Mr Moloney said that Glanbia plans to focus on the sports nutrition sector, particularly the weight-loss management and active ageing market in the US. The company was looking at buying companies with sales of as much as $150 million.

The Irish Farmers’ Association welcomed the announcement of the proposed sale.