Kerry Co-op milk lorry collecting milk on a supplier s farm in Kerry.
The Kerry joint venture is in peril. Leaked documents suggest a loaded deal, with the co-op required to buy the whole Irish processing business out within five years.
Concerns are circulating over the condition of processing facilities and future investment requirements. The co-op can’t speak publicly until the proposal is released to the stock exchange, but its assertion that the final decision will be made at board level is causing fear, anger, and revolt.
When Glanbia Co-op embarked on its joint venture proposal in 2010, all 14 co-op board members sat on the plc board. This gave them a deep insight into the strengths and weaknesses of the business they were buying into.
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Kerry Co-op CEO Thomas Hunter McGowan.
Kerry Co-op is understood to be engaging with banks to explore the possibility of borrowing up to €300m to fund its proposed joint venture with Kerry Group.
While the board of Kerry Co-op has not signed off on any specific plans to fund the joint venture, the Irish Farmers Journal understands that Kerry Co-op CEO Thomas Hunter McGowan is investigating the potential to borrow the money needed to finance the joint venture deal, which would see the co-op pay €480m to take a 60% majority stake in Kerry Group’s primary dairy business.
It’s understood Goldman Sachs, the advisers for Kerry Group, have informed Kerry Co-op it needs to have a funding plan in place very soon. However, Hunter McGowan is adamant Kerry Co-op cannot agree on a funding model until the valuation of the business is finalised once due diligence is complete.
Milk Lorries queueing for the intake bays at Kerry Foods Charleville plant.\ Donal O Leary
The board of Kerry Co-op will hold a crucial meeting on Wednesday 20 January to decide whether or not it will submit a €480m offer to Kerry Group plc for a 60% majority stake in its primary dairy business.
Speculation is rife in Kerry farming circles that the co-op will formally submit a €480m offer to buy 60% of Kerry Group’s dairy business this week, which would value the entire business outright at €800m.
Kerry Group’s primary dairy business is understood to have annual sales of €1.2bn and makes profits of €80m to €100m per year.