Over 200 shareholders of Kerry Co-op gathered to discuss the proposed $536 million acquisition of Kerry Dairy Ireland from Kerry Group. The deal, which would give Kerry Co-op a 70% stake in Kerry Dairy Ireland, requires shareholder approval. Key topics included governance, milk supply, and concerns about the deal’s tax implications and arbitration settlements.
Over 200 shareholders and milk suppliers from Kerry Co-op gathered in Tralee to discuss a significant $536 million (€500 million) acquisition deal involving Kerry Dairy Ireland. The meeting, organized by the Irish Farmers’ Association (IFA), precedes a crucial shareholder vote scheduled for December 16, 2024. This vote will determine whether Kerry Co-op proceeds with acquiring a 70% stake in Kerry Dairy Ireland from Kerry Group.
The Deal: Kerry Co-op’s Acquisition of Kerry Dairy Ireland
Under the terms of the deal, Kerry Co-op will purchase a 70% stake in Kerry Dairy Ireland for $371 million (€350 million), with Kerry Group retaining the remaining 30%. The agreement also includes a call option, allowing Kerry Co-op to purchase the remaining 30% by mid-2030. The first phase of the deal is expected to conclude by January 2025, pending shareholder approval.
Shareholder Vote and Information Campaign
Approval for the acquisition requires a two-thirds majority from A and B shareholders at a Special General Meeting (SGM) in Killarney. To ensure transparency and provide shareholders with all necessary information, Kerry Co-op has organized a series of information sessions starting November 25, 2024, in key locations across Kerry, Limerick, Cork, and Clare.
Jason Fleming, Kerry IFA Chair, noted that the deal has been a “hot topic” at branch meetings, acknowledging concerns over the delay between the announcement of the deal and the commencement of the information events. He emphasized the importance of making an informed decision ahead of the vote.
Key Deal Details and Tax Concerns
The deal involves a share exchange and redemption process that will restructure Kerry Co-op’s $1.8 billion (€1.7 billion) stake in Kerry Group. Under the terms of the deal, 85% of the shares will be converted to Kerry Group plc shares, while the remaining 15% will be used to acquire Kerry Dairy Ireland. Shareholders have requested written assurances from tax authorities regarding the potential implications of the share conversion. Tax advisors PwC and EY have reportedly secured assurances from Revenue confirming that there will be no immediate tax impact unless shares are sold or transferred.
Addressing Milk Supply and Governance Concerns
Concerns were raised about the potential impact on milk supply and pricing. Conor Creedon, Kerry Co-op’s vice-chair, reassured shareholders, emphasizing the strong profitability of Kerry Dairy Ireland, which has been stress-tested for various milk supply scenarios. Creedon further noted that, if approved, the deal would result in increased profits benefiting co-op shareholders and supporting competitive milk prices.
Another key discussion point was governance, with calls for equal representation of non-milk-supplying shareholders (B and C categories) on the new co-op board. At present, only A shareholders—active milk suppliers—are eligible for board positions.
Arbitration and Future Implications
A proposed $54 million (€50 million) fund to resolve an ongoing arbitration case concerning milk pricing sparked significant debate. While some critics labeled it a “bribe” since it would apply only to milk supplied between 2015 and 2020, others viewed it as a fair settlement condition for the deal’s approval.
Farmers voiced concerns over the long-term implications of the deal on their businesses, particularly regarding input costs and milk pricing. One milk supplier emphasized, “Milk price is the foundation of our livelihoods.”
Path Forward
While some shareholders supported the proposal as a strategic win for Kerry Co-op and the dairy industry, others expressed caution. Jason Fleming concluded the meeting by encouraging shareholders to attend upcoming sessions and ensure that all their questions are answered.
The outcome of the December vote will be pivotal, as it will determine whether Kerry Co-op regains control of milk processing operations, which many see as crucial for the future of Kerry’s dairy industry.
