Following on from our coverage last week, Glanbia Co-op CEO Jim Bergin made contact with the Irish Farmers Journal this week to reinforce the benefits of the proposed new Glanbia structure.

The three main points of contention we flagged last week in our coverage were: (1) the interlinking of so many big decisions or resolutions, (2) the unspecific nature of the investment fund, and (3) the fact there are no commitments to suppliers other than a form of words underpinning any future milk or grain price.

Milk price

Let’s start with the milk price piece. On the IFA webinar, the Glanbia chair highlighted that he didn’t want to get into a situation like that in Kerry.

In that example, a former Kerry CEO used a form of words – “the leading milk price” – and since then Kerry Co-op and Kerry Group have been at loggerheads.

It gives suppliers a vision in output prices

Let’s be clear that’s not what we were suggesting to do. FrieslandCampina and Fonterra both use a basket of indexes and competitor pricing to set a future range in price for farmers.

The range narrows or is topped up based on the market situation. It gives suppliers a vision in output prices and forces the board and management to look at alternative cost centres rather than hit the easy target of individual suppliers.

Glanbia is good at these types of initiatives and has been innovative in the past, and should have incorporated some pricing tool like this to help get this package across the line.

Interlinking

So why the five interlinked resolutions? Jim Bergin suggests now the new entity will be out on its own with no plc and the package deal makes it attractive for all stakeholders to Glanbia – the banks, the employees, partners etc.

He also makes the point that a company of this scale needs a funded acquisition arm and having that structure would be quite normal for a company this size. He said: “A company needs funds to follow trends, or waves that could accelerate income or create a new income stream.”

Investment fund

On the investment fund, Bergin suggests the new entity because it is changing ethos to a co-op would not be able to generate a reserve fund for investment from business as usual.

He says that all Glanbia is trying to do with this move is swap one asset class for another. He stresses they have the experience and knowledge for investment.

The intention seems genuine to try to shape the new Glanbia entity into adding further value to cheese, powders or whey protein isolates, or create a new business stream that might grow into something much bigger.

I think it’s fair to say the option to research new investments, create a new or diverse income stream, or to develop a cash reserve for investments is positive

However, most shareholders seem to want the basics done well internally in the business first, while others would rather the board came back to them when something more concrete was on the table.

In general, I think it’s fair to say the option to research new investments, create a new or diverse income stream, or to develop a cash reserve for investments is positive. However, getting permission now without any future vote needed is a big ask for many shareholders.

This exact issue is a problem among Kerry shareholders at the moment.

Kerry shareholders are planning to vote in a special general meeting when COVID permits.

Glanbia shareholders will decide this week whether they think it’s the right move to package all these resolutions together

Following on from what nearly recently happened around a joint venture down in the Kingdom, shareholders in Kerry want to be able to have a vote on any significant investment play by the co-op.

Glanbia shareholders will decide this week whether they think it’s the right move to package all these resolutions together.

There seems almost unanimous acceptance that the co-op is better in control of its own destiny and that governance should evolve. However, resolution three and four on the major selldown are not as clear cut.