LONDON, UK: Glanbia Co-operative Society Limited has signed binding legal agreements to acquire Glanbia Plc’s 40% interest in Glanbia Ireland DAC for a purchase price of €307 million, a bourse filing noted.
Update on the Proposed Transaction
On 10 November 2021, Glanbia announced that it had agreed a non-binding memorandum of understanding (“MOU”) for the disposal of the PLC’s 40% interest in Glanbia Ireland to Glanbia Co-op. Glanbia Plc has now entered into binding legal agreements with the Co-op in connection with the sale.
Strategic rationale for the Proposed Transaction
The board of the PLC believes the Proposed Transaction will continue the alignment of Glanbia’s portfolio through the strategic focus on global nutrition via its platforms, Glanbia Performance Nutrition (“GPN”) and Glanbia Nutritionals (“GN”), and through strategic joint ventures.
As a brand owner and provider of value added nutrition solutions serving high growth markets, the PLC will increasingly focus on its global nutrition strategy.
The Proposed Transaction will also allow the PLC to deploy the capital received from the Proposed Transaction in investment to drive further growth and to return capital to shareholders.
Glanbia Ireland is a joint venture owned 60% by Glanbia Co-op and 40% by the PLC. Glanbia Ireland is the largest milk processor and grain buyer in Ireland, producing a range of value-added dairy ingredients and consumer products as well as selling farm inputs. Glanbia Ireland operates 11 processing plants, 52 agri retail branches and has over 2,000 employees.
As of the half year ended 3 July 2021, the value of the gross assets the subject of the transaction was €225.2 million and the profit before tax attributable to the PLC’s interest in Glanbia Ireland for the full year ended 2 January 2021 (“FY 20”) was €23.9m. Glanbia Ireland contributed 8.5 cent to Glanbia’s adjusted earnings per share in FY 20.
Proposed Transaction consideration
The consideration payable to the PLC in respect of the Proposed Transaction is €307 million, to be paid in cash on completion. The consideration is not subject to any adjustment mechanisms post completion of the Proposed Transaction. The Co-op has informed the PLC that it is in the position, if required, to fund the consideration through a combination of existing cash resources and debt facilities.
Use of proceeds and financial effects of the Proposed Transaction
The proceeds from the Proposed Transaction will be primarily invested in growth opportunities with up to 50% of the proceeds being returned to shareholders via a share buyback.
As completion of the Proposed Transaction is currently expected to take place in the first half of 2022, the disposal of the PLC’s interest in Glanbia Ireland would therefore be reflected in the Group’s accounts for the financial year ending 31 December 2022 and would be expected to be dilutive to the adjusted earnings per share of Glanbia on a full year reported basis in 2022.