Kerry Co-op shareholders are planning to force the board to hold an emergency vote on how shares in Kerry Group plc are valued, which will have implications for how a potential deal to purchase the plc’s legacy milk business can be financed.
The co-op, Kerry Group’s largest shareholder, has been in discussions with the listed company about a possible deal that would see Kerry’s traditional dairy operation, which includes brands such as Dairygold, Charleville and Kerry Low-Low spread, spun out into a joint venture in which the co-op would take a 60 per cent stake.
Co-op shareholders are, however, fearful that the board may opt to sell off a major chunk of their stake in the plc to finance the deal. The current value of co-op’s holding in the plc is about €2.2 billion.
Shareholders want a share redemption scheme locking in a conversion rate for their shares, at a rate of one to 5.9 plc shares, added to the co-op’s rulebook. This would effectively ringfence most of the €2.2 billion in share capital, leaving the board with just €100 million to finance any potential deal.
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“We feel co-op shareholders should have a say in the proposed joint venture,” co-op shareholder Paddy Casey said, noting that plc shareholders would be entitled to vote on any proposed deal. He also said he was confident that a resolution changing the rules would have the required support of two-thirds of shareholders.
He said shareholders pushing for the vote had collected the required number of signatures to force a special general meeting (SGM) and will present the necessary documentation to the board on Friday. A spokesperson for the co-op could not be contacted.
Under the co-op’s rules a special general meeting may be convened by the board at any time on its own authority or upon a requisition addressed to the board, chairman or secretary signed by members representing at least 20 per cent of ordinary shares. If the board fails to convene a meeting within 30 days the members can convene one themselves.
The co-op had intended to put a resolution around the conversion rate of co-op shares to shareholders at the co-op’s annual general meeting (agm) in June this year but pulled it after legal advice. In protest, shareholders voted down two technical and unrelated resolutions.
Shareholders are concerned at the price that the co-op might be forced to pay for the acquisition, with figures of €600 million touted in various media reports last year, and whether such a deal represents a prudent investment. Kerry’s processing business, which is spread over three plants in Listowel, Charleville and Newmarket, is also said to require significant investment.
Kerry Group suspended talks with the co-op last year about the possible sale of its dairy business amid reports that both sides could not agree a price, but they were revived several months ago. Kerry Group opened its books to the co-op for due diligence earlier this year.
