Kerry co-op has announced its share redemption offer, known as the “cash for shares” scheme, will open for applications from shareholders next week on Monday 13 May.

The scheme will remain open for just over three weeks until Wednesday 5 June.

The share redemption scheme is voluntary in nature but will give shareholders in Kerry co-op the option to sell some or all their co-op shares.

Any cash received by Kerry co-op shareholders who apply for this scheme will be deemed as an income distribution by the Revenue Commissioners and, as such, will be subject to income tax rather than capital gains tax.

Market value

Kerry co-op shares currently have a grey market value of about €300/share, which Revenue is using as the valuation on co-op shares for gift/inheritance tax purposes when shares are transferred.

However, this scheme is likely to put a much higher see-through value on Kerry co-op shares and could double to more than €600/share.

Kerry co-op holds 6.12 Kerry Group plc shares for each co-op share in existence.

With Kerry plc shares trading above €100 for the last week, the full see-through value of a single co-op share is now over €600. Revenue is expected to use this new value for all future tax purposes relating to Kerry co-op shares.

Locked in

Kerry co-op says there is currently no mechanism for shareholders to liquidate their shares, meaning many members of the co-op are effectively “locked in”.

The co-op said that shares traded on grey markets up to now were sold for prices that represented very poor value for shareholders.

Kerry co-op chair Mundy Hayes said the scheme is designed to give shareholders in the co-op the opportunity to liquidate their assets.

The scheme is designed to give shareholders access to funds rather than shares

“The provisions of this share redemption scheme will allow all shareholders in Kerry co-op the opportunity to redeem their ordinary shares for cash. The scheme is designed to give shareholders access to funds rather than shares.

"It will be of particular interest to many of our older members who are on low incomes and can redeem their shares at a very favourable tax rate,” said Hayes.

In order for the scheme to operate, Kerry co-op will need to make two changes to its co-op rule book, which can only be approved by a shareholder vote. Firstly, the co-op must embed the new cash for shares scheme in its rule book.

Secondly, and most importantly, the co-op must vote to remove a rule in its rule book which stipulates the co-op must hold at least a 10% stake in Kerry Group plc.

Kerry co-op currently owns 13.7% of the shares in Kerry Group plc but may have to sell down its shareholding below 10% in order to fund this cash for shares scheme, depending on the uptake.

Both of these proposed rule changes will be put to a shareholder vote at the AGM of Kerry co-op, which takes place on 19 June. The board of Kerry co-op is recommending shareholders vote in favour of both rule changes.