Glanbia to sell 60% stake in Dairy Ingredients Ireland

Irish nutritional solutions and cheese firm Glanbia has signed a €44.5m deal to sell a 60% stake in its dairy ingredient division – Dairy Ingredients Ireland (DII) – to its largest shareholder Glanbia Co-op Society.

The agreement to divest the stake to Glanbia Co-op Society, a farmer-led cooperative which owns 54.4% of Glanbia, is part of the company’s strategy to focus on international growth.

Following the deal, the parties will form a new joint venture called Glanbia Ingredients Ireland (GII), under which Glanbia will hold 40% in DII, while Glanbia Co-op Society will hold 60%.

Glanbia managing director John Moloney said the new joint venture allows the expansion of dairy processing by Glanbia Co-op Society members and helps Glanbia to focus on its international growth strategy.

"The abolition of EU milk quotas in 2015 will initiate a new era for milk production and offers increased prospects for the Irish dairy industry through a clear opportunity to expand milk supply," Moloney added.

DII is the largest dairy ingredients processor in Ireland, collecting nearly 1.6 billion litres of milk and processing it into c.180,000t of dairy ingredients, primarily for export to about 50 countries worldwide.

In 2011, the company posted revenues of €738m, operating profit of €33m and EBITDA of €44m; and as of December 2011, it had gross assets of €313m.

The deal needs to gain the acceptance of 50% of Glanbia Co-op Society members – lower than the 75% limit required in a similar vote in 2010, which failed to achieve approval.

About €180m will be invested in the joint venture to boost the existing peak dairy processing capacity by up to 60%.

Glanbia noted that proceeds from the sale of the 60% shareholding will be used to repay existing bank facilities, and added that the transaction is not expected to have a materially dilutive effect on its adjusted earnings per share.

In a separate announcement, Glanbia Co-op Society said that it is planning to reduce its shareholding in Glanbia from 54.4% to 41.4%, by selling a 6% stake and distributing a further 7% of the share capital to society members, in order to part-fund its investment.

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Image: Glanbia managing director John Moloney said the deal facilitates the expansion of dairy processing by Glanbia Co-op Society members and allows the company to pursue international growth plans. Photo: courtesy of Glanbia.