We have a very important vote in the Glanbia region this week which might shape the future of our organisation, depending on the outcome.
We are all busy enough on the lead-up to Christmas on farm, trying to get cows dried off and sorting out the last of the big jobs before things hopefully settle down for a bit through the holidays.
We shouldn’t have anything more important to do on Friday afternoon though than to log on and have our say on this important issue.
We have a huge opportunity to divest ourselves of the influence of the plc on our businesses.
Unfortunately, there is a serious conflict of interests between what is best for the plc and what is best for the milk suppliers within the Glanbia family. And, unfortunately, despite the co-op owning 60% of the Glanbia Ingredients Ireland (GII) business, the plc has managed to direct the company to its benefit over the lifetime of the GII project.
GII was set up from the start with a defined margin and a growth strategy that used part of that margin to fund growth in capacity. The margin severely handicapped the company’s ability to pay a satisfactory milk price to its suppliers but it protected the parent company’s initial investment.
Maybe looking back at the time, it should have been all or nothing that was bought
It ensured that investment grew in value and also ensured that further investment from the parent companies wasn’t necessary. Maybe looking back at the time, it should have been all or nothing that was bought.
The company has grown beyond all expectations over the last six years and the reality is that this would have taken a lot of heavy lifting from farmers, regardless of what vehicle was used to drive that growth.
The current situation, however, looks like we have done all of the heavy lifting for both sides of the partnership here. We have paid for the growth in capacity and therefore value in GII out of milk price and now we find ourselves paying a premium to the plc for that growth in value of the company.
This has been good business from the plc point of view and it has done an exceptional job of protecting and indeed increasing the value of the plc stake in GII at no cost or risk to its shareholders. It has conveniently been in a position of considerable strength to achieve this, with significant influence on the board of GII through this time.
there is still another fly in the ointment
So, should we still pay this price now despite the inflated valuation and move on towards a full co-op model despite what might be a bad deal? We definitely should, as waiting around for another solution with the current structure in place seems like a lost cause. But there is still another fly in the ointment.
The vote to move this purchase forward is entwined with another less attractive prospect of creating an investment fund for our board to use at its discretion.
This is the same board that let the peak milk situation develop well beyond the point of no return and in my view failed in its duty of care to its milk suppliers to take action or inform them in a timely fashion that there was an issue. I am concerned that milk suppliers have not had enough time to properly consider the proposals and the board is trying to rush this through before Christmas and the busy spring period.
At the information meetings we were encouraged to back this deal and to get behind our new co-op model, to do more business with our co-op and to feel proud of our co-op.
The concerns about the investment fund have ultimately been disregarded
Well that’s a two-way street and maybe leadership should ask if they could have communicated better and earlier with milk suppliers and shareholders as to the future direction of the company over the last year.
The concerns about the investment fund have ultimately been disregarded. It is still a central part of the vote. It would seem that the board has a lot more confidence in its own ability to administer this fund than its members have in it.
This situation poses a significant risk to the vote being successful and may unfortunately be the rock that this vote ultimately perishes on.