The Irish Farmers Journal understands that the board of Kerry Co-op believes there is strong interest from pension funds and other investment companies in buying Kerry Co-op shares from shareholders.

Quick profit

In this scenario, investment companies would buy Kerry Co-op shares on the grey market for a price slightly below the share price offered in Kerry Co-op’s share redemption scheme.

These shares would then be redeemed for cash, allowing the investment companies to make a quick profit.

The board believes this would be attractive for ordinary Kerry Co-op shareholders as it would see them pay 33% capital gains tax (CGT) as opposed to income tax from selling shares via the redemption scheme.

Interest

Sources in the financial industry have told the Irish Farmers Journal there is certainly a ‘cohort’ of investment companies that would be interested in this type of unconventional transaction.

Concerns

Tax advisers have again raised concerns that Revenue could pursue ordinary investors for income tax avoidance if they try to dispose of shares in this manner. Separately, IFAC held meetings in Galway and Mayo this week with farmers that own shares in Kerry Co-op to provide them with tax advice. Many farmers who previously supplied milk to Dawn Dairies, which was owned by Kerry Co-op and had plants in Moate, Galway, Limerick and Cork, were granted shares in Kerry Co-op.

These shareholders are now deemed as C shareholders but can still redeem their shares under the new scheme.