Kerry Co-op is understood to be engaging with banks to explore the possibility of borrowing up to €300m to fund its proposed joint venture with Kerry Group.

While the board of Kerry Co-op has not signed off on any specific plans to fund the joint venture, the Irish Farmers Journal understands that Kerry Co-op CEO Thomas Hunter McGowan is investigating the potential to borrow the money needed to finance the joint venture deal, which would see the co-op pay €480m to take a 60% majority stake in Kerry Group’s primary dairy business.

It’s understood Goldman Sachs, the advisers for Kerry Group, have informed Kerry Co-op it needs to have a funding plan in place very soon. However, Hunter McGowan is adamant Kerry Co-op cannot agree on a funding model until the valuation of the business is finalised once due diligence is complete.

If the board of Kerry Co-op decides to go down this route of borrowing the money, it would mean milk suppliers would not need to share up to fund the joint venture and dry shareholders would not need to take a haircut on the value of their shares in Kerry Co-op. However, loading the joint venture with significant debt levels would severely limit its ability to pay a better milk price to Kerry suppliers given the capital repayments that would be required.

Separately, ICMSA president Pat McCormack said any new joint venture arrangement between milk suppliers and Kerry Group must deliver on the milk price commitment agreed in 2011.

The ICMSA president said he has recently met with the board of Kerry Co-op and is seeking a meeting with Kerry Group to discuss the proposed joint venture and its impact on milk suppliers.