Second bid expected by Kerry suppliers

By Paul Mooney

MANY milk suppliers to Kerry Creameries have in the past week welcomed the Kerry Group bid for Golden Vale as indicating a firm commitment to the milk business.

A successful deal would copperfasten Kerry's involvement in milk and agri-business in the medium term, it is claimed.

Some suppliers would have doubted the Group's commitment to the milk business, particularly with transition ahead in its management. A deal would be a considerable boost for younger milk suppliers.

The general expectation among Kerry suppliers yesterday (Wednesday) was that Denis Brosnan would make a second, higher bid for Golden Vale over the next week, of around 1.5 euros per share and with a closing date for acceptance.

He indicated to the Kerry boards last week that there would be no haggling over a deal. That could be damaging to the Kerry share price.

Denis Brosnan has also indicated that he would target savings of about £20 in the event of an acquisition taking place.

There is considerable overlapping of milk transport on both the manufacturing and liquid milk sides. Collection lorries from both companies criss-cross including around the Killarney and Castleisland areas. GV has a number of large suppliers in these areas. Kerry has numerous suppliers in Limerick and Clare. The Group would also be targeting savings on processing. In recent years it has bought between 30 and 50 million gallons annually from Town of Monaghan and elsewhere for casein manufacture. Transport of this milk is expensive.

Kerry supplier representatives point out that such savings would help maintain maximum milk price. They are adamant that Kerry milk price is 2p to 3p higher over the year than that of Golden Vale.

Kerry suppliers will carefully study the effect of a deal on the make up the Kerry co-op board. Golden Vale would probably get nine seats on an enlarged co-op board. The Kerry board has had 18 members from the co-op's six regions but it is in the process of being reduced in size by amalgamation of regions.