Glanbia is set to exit the dairy sector to focus on growing its core ingredients and nutrition divisions after agreeing a deal to sell its 40% stake in Ireland’s biggest milk processor.
The firm plans to offload its interest in Glanbia Ireland to joint venture partner Glanbia Co-operative Society for €307m (£262.3m).
The move will allow Glanbia to focus exclusively on its two growth platforms: Glanbia Performance Nutrition and Glanbia Nutritionals.
Glanbia said it would return up to half the proceeds from the deal to shareholders, with the rest used to invest in growth opportunities.
MD Siobhan Talbot said the deal represented the next stage of the transformation journey of the group following many years of collaboration with Glanbia Co-op as joint venture partners.
“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.”
Owned by the farmers that supply it with milk and grain, the co-op already holds a 60% majority stake in the venture, which is the largest milk processor and grain buyer in Ireland. It produces a range of value-added dairy ingredients and consumer products, with brands including Avonmore, Premier Dairies, Snowcream, Wexford Creamery and cheese maker Kilmeaden.
The co-operative runs 11 processing plants, 52 agri retail branches, employs more than 2,000 staff and generated revenues of €1.9bn in the 2020 financial year.
The business will change its name following completion of the deal to something that doesn’t include ‘Glanbia’.
Up to 50% of the price tag will be funded by the co-op selling shares in Glanbia plc, with the rest to come from borrowings.
Glanbia Co-op also proposes to spin out €168m of shares in the plc to its existing members, with plans to create an investment fund to “pursue new opportunities”.
The co-op is the largest individual shareholder in Glanbia, currently holding just more than 32% of the issued share capital of the company. This will be reduced to about 24% following the share sale and spin-out.
Co-op chairman John Murphy said: “This proposal is the latest step on our journey which began in 2012 with the creation of the strategic joint venture between Glanbia Co-op and Glanbia plc. If our members approve this proposal, we will have a very strong co-op, with full ownership of Glanbia Ireland.
“We will have greater flexibility to support our farmers and be equipped with a dedicated investment fund to help drive higher returns in the future. Our fully independent co-op will be run on pure co-op principles with strong financial discipline, an experienced leadership team and board.”
CEO Jim Bergin added: “We are very ambitious for this great business and are excited by the opportunities presented by this natural evolution to a pure co-op. It will provide greater flexibility to support co-op members, pursue new opportunities and allow us to focus on adding value to our milk and grain for the benefit of our farmers.”
Shares in Glanbia rose 0.7% today to €13.95.
Separately, the group released a trading update for its third quarter, ended 2 October. Total revenues in the first nine months of the financial year increased by 9.7% thanks to “good demand” across Glanbia Performance Nutrition and Glanbia Nutritionals.
Glanbia now expected its earnings per share to be at the upper end of the guided range of 17% to 22%.
Talbot added: “As we exit 2021 we will maintain our focus on driving top line growth and are planning further pricing actions for early in 2022 in response to the continued inflationary environment.”