Kerry Co-op Outlines €500 Million Dairy Deal Amid Shareholder Scrutiny
Source: DairyNews.today
Kerry Co-op has presented its business case for acquiring a 70% stake in Kerry Group’s dairy division, Kerry Dairy Ireland, for €500 million.
Strategic Opportunity
Jim Woulfe, strategic advisor to the Kerry Co-op board, emphasized the strategic benefits of the acquisition, including reclaiming control of milk processing, resolving a long-standing milk price dispute, and unlocking share value for members in a tax-neutral manner. Woulfe described Kerry Dairy Ireland as a “sustainable, efficient business” with projected 2024 revenues of €1.3 billion.
The deal has undergone three months of due diligence by experts fr om firms including PwC and EY, covering financial, legal, engineering, and environmental considerations.
Financial Framework
Simon MacAllister of EY outlined the €500 million valuation, based on an average EBITDA of €71 million over four years. Funding will be derived from:
€250 million from Kerry Co-op's retained shares in Kerry Group.
€56 million in bank loans from both Irish and international lenders.
A €43 million loan from Kerry Group.
A call option enables Kerry Co-op to acquire the remaining 30% of Kerry Dairy Ireland by 2035, with financing tied to milk supplier contributions, retained earnings, and additional third-party debt.
Dairy Industry Impact
Kerry Dairy Ireland processes over 1.1 billion liters of milk annually from 2,740 family farms and operates seven production facilities across Ireland and the UK. It also manages 31 agri-service stores and markets well-known brands such as Cheestrings, LowLow, and Charleville.
The business employs over 1,500 people and aims to reduce scope 1 and 2 emissions by 48% by 2029 compared to 2017 levels. Concerns about scope 3 emissions were addressed, with Woulfe clarifying that most related costs fall outside the business's operational scope.
Shareholder Concerns
Some shareholders expressed reservations about potential tax implications of the share exchange program and the loss of the existing share redemption scheme. Others raised concerns about milk collection in remote areas like the Dingle Peninsula and criticized the lack of detailed information provided so far.
Kerry Co-op responded by committing to issue a 30-page document outlining the proposal in detail next week and advised shareholders to seek individual tax advice.
Next Steps
A Special General Meeting (SGM) is scheduled for December 16, 2024, at the Gleneagle INEC Arena in Killarney, wh ere a 66% approval from attending A and B shareholders is required for the deal to proceed. To facilitate attendance, the co-op will provide bus services from across the catchment area.
If approved, the deal will mark a significant shift in Ireland’s dairy industry, giving Kerry Co-op control of a major milk processing operation while resolving key disputes and advancing environmental goals.
Jim Woulfe, strategic advisor to the Kerry Co-op board, emphasized the strategic benefits of the acquisition, including reclaiming control of milk processing, resolving a long-standing milk price dispute, and unlocking share value for members in a tax-neutral manner. Woulfe described Kerry Dairy Ireland as a “sustainable, efficient business” with projected 2024 revenues of €1.3 billion.
The deal has undergone three months of due diligence by experts fr om firms including PwC and EY, covering financial, legal, engineering, and environmental considerations.
Financial Framework
Simon MacAllister of EY outlined the €500 million valuation, based on an average EBITDA of €71 million over four years. Funding will be derived from:
€250 million from Kerry Co-op's retained shares in Kerry Group.
€56 million in bank loans from both Irish and international lenders.
A €43 million loan from Kerry Group.
A call option enables Kerry Co-op to acquire the remaining 30% of Kerry Dairy Ireland by 2035, with financing tied to milk supplier contributions, retained earnings, and additional third-party debt.
Dairy Industry Impact
Kerry Dairy Ireland processes over 1.1 billion liters of milk annually from 2,740 family farms and operates seven production facilities across Ireland and the UK. It also manages 31 agri-service stores and markets well-known brands such as Cheestrings, LowLow, and Charleville.
The business employs over 1,500 people and aims to reduce scope 1 and 2 emissions by 48% by 2029 compared to 2017 levels. Concerns about scope 3 emissions were addressed, with Woulfe clarifying that most related costs fall outside the business's operational scope.
Shareholder Concerns
Some shareholders expressed reservations about potential tax implications of the share exchange program and the loss of the existing share redemption scheme. Others raised concerns about milk collection in remote areas like the Dingle Peninsula and criticized the lack of detailed information provided so far.
Kerry Co-op responded by committing to issue a 30-page document outlining the proposal in detail next week and advised shareholders to seek individual tax advice.
Next Steps
A Special General Meeting (SGM) is scheduled for December 16, 2024, at the Gleneagle INEC Arena in Killarney, wh ere a 66% approval from attending A and B shareholders is required for the deal to proceed. To facilitate attendance, the co-op will provide bus services from across the catchment area.
If approved, the deal will mark a significant shift in Ireland’s dairy industry, giving Kerry Co-op control of a major milk processing operation while resolving key disputes and advancing environmental goals.
