We understand Kerry Co-op will soon finalise or has finalised a bid to essentially take control of the dairy business from Kerry Group.
Some of those not that close to the game might ask what’s going on here – how can they buy it from themselves?
At the moment, Kerry Group (the plc) owns the milk business and Kerry Co-op (the milk suppliers and dry shareholders) is effectively a holding company where the farmer representatives sit but have no control on milk price or any development in further milk processing etc.
Kerry Co-op owns slightly less than 13% of Kerry Group.
Five years ago milk suppliers were asked to sign a five-year contract to supply their milk to Kerry Group. Most other processors also created a milk contract-type arrangement with suppliers at the same time.
In return, the Kerry farmers would get paid, all milk would be collected, and they wouldn’t have to put their hand in their pocket for milk processing equipment. They would be allowed expand but it wouldn’t become a free-for-all.
Leading milk price
The follow-up milk contract discussions between Kerry Group and Kerry Co-op centred on a comment then CEO of Kerry Group Stan McCarthy made to suppliers. He said Kerry would pay the leading milk price suppliers if they signed up. What followed was a long battle over the words ‘the’ leading milk price or ‘a’ leading milk price and what determines ‘leading milk price’.
Relations between the co-op and the plc quickly soured. The regular updates from Kerry Group to the Kerry Co-op board waned.
The arbitrator made a decision that favoured the farmers and a payment was made from Kerry Group to milk suppliers in the January 2020 milk cheque in what was termed a goodwill payment.
Now some believed they were owed more and maybe they still are.
However, leaving all this behind, the conversation between the co-op and the plc has now turned to selling the majority shareholding in the dairy business to the farmers. This effectively gives the farmers back majority shareholding and control of the dairy business, with the plc taking on the balance (the 40%).
Questions have to be asked. Is this what shareholders want? Is this what milk suppliers want? Is this the remit the co-op board have as representatives of the milk suppliers?
These will or at least should be answered over coming weeks and months.