Shareholders to vote on Dairygold spin-out

By Pat O'Keeffe

Dairygold's plan to spin out shares in a new plc called Reox Holdings will be put before shareholders at a special general meeting scheduled for Wednesday 17 May. The details of the asset spilt were revealed in last week's Irish Farmers Journal.

If approved, non core assets with potential for growth will transfer to an unlisted plc called Reox Holdings.

Existing shareholders in Dairygold co-op will receive three shares in Reox for every four they currently hold in Dairygold. Twenty five per cent of the shares in Reox will be retained by Dairygold co-op.

If approved, Goodbody Stockbrokers will operate a matched market in Reox shares and theoretically farmers could dispose of their entire holding to an open market of investors.

However, the maximum that one individual can acquire will be set at 5% to prevent a hostile takeover.

The key attraction in Reox is likely to be Alchemy Properties, which will hold prime sites in Cork city, Mallow, Midleton, Cahir as well as numerous Munster villages and towns. A total of 59 wholly owned properties are listed in the circular issued to shareholders this week.

Dairygold chief executive Jerry Henchy said that the proposal represents the best possible method of unlocking the value of the business, while at the same time protecting the core activities of the co-op from undue risk.

Senior management in Reox will be incentivised through a Long term Incentive (LTI) scheme.

This will be measured on the growth in the value of net assets, over and above the rate of inflation. Rewards would kick-in once growth in excess of inflation plus 5% was achieved annually over a five year period.

The maximum rewards would apply if assets growth of inflation plus 15% was attained. In this scenario, senior managers would potentially receive 6.5% of the value of the growth.

No specific milk price commitment has been included in the plan. However, Jerry Henchy did say that "we don't want to be average''.

Meanwhile Jerry Henchy defended the debt load attached to Dairygold co-op in the event of the spin-out of shares.

The debt has increased due to the recent acquisition of Nutricia in Macroom. The cost of the plant was €20m and an investment of €17.8m will be required for an additional dryer.

"The plant will operate on a fixed margin on manufacture of 3.1% with a 12 year supply contract,'' he said. He added that it will generate €2m of free cash per annum after annual capital repayments of €5.4m, with the associated debt cleared in seven years.

Hanley takes Acting CEO role at Lakeland

The Board of Lakeland Dairies has appointed the deputy chief executive of the Co-operative, Michael Hanley, as acting chief executive. The appointment has been made on an interim basis to facilitate personal leave of absence for the chief executive, Ed Prendergast, who is ill.

Michael Hanley has held various senior management positions, including general manager of Northern Ireland operations, general manager of dairy operations and manager of member relations.