As exclsuively revealed on farmersjournal.ie this week, the board of Ornua is considering a restructuring proposal which would see shares in the organisation to the value of €100m given to eligible milk suppliers.
The proposal, which was presented to the board of Ornua by Dairygold last Friday, would see Ornua restructure from a co-op to an unlisted plc. Ornua is currently owned by the processing member co-ops. Under the proposed restructuring, existing member co-ops would directly own 80% of the new entity while eligible dairy farmers would own the remaining 20%. Based on Ornua’s valuation (net asset value on the balance sheet) of €520m at the end of 2018, farmers would be allocated shares to the value of €104m.
Creating an unlisted plc is different to the path Kerry and Glanbia took in the past when they floated on the stock exchange and listed as full plcs. An unlisted plc is not on a public stock exchange but its shares can be traded on an internal share trading mechanism solely for co-ops and farmers. Importantly for farmers, the proposal outlines Ornua would remain in exclusive ownership of the member dairy co-ops and dairy farmers.
Based on the estimated 13,500 dairy farmer suppliers to Ornua, this would see each eligible milk supplier on average receive shares to the value of €7,500.
Dairy farmers who supply Kerry Group would not be entitled as Kerry left Ornua a number of years ago.
Documents seen by the Irish Farmers Journal outline that the proposal would give dairy farmers an ownership value of up to 2c per litre based on their 2018 milk supply. That would mean a 100-cow dairy farmer supplying 500,000 litres would receive shares to the value of €10,000.
The member co-ops of which there are around 34 members would receive around €416m in shares based on last year’s valuation.
The co-op members would benefit by unlocking the value that has built up in Ornua by taking their share of the €416m on to their respective balance sheets.
The shares will be given out based on their current shareholding in Ornua. For example, Glanbia owns around 25% of Ornua today with Dairygold owning a further 20%. Other processors such as Lakeland, Arrabawn, the west Cork co-ops and Aurivo also hold significant shareholdings. In total there are 34 co-ops that hold some stake in Ornua.
Board shake-up
Under the proposal, it is recommended that a 25-member advisory council be set up made up of farmers from the shareholding co-ops and the farm organisations – IFA and ICMSA along with ICOS. It is believed that five people from this advisory council would be put forward to the main board of Ornua.
The new board of Ornua would see the existing board resign to be replaced by the five nominees from the advisory council along with five independent directors and two nominated from the farm organisations.
The board of Ornua has remained tight-lipped on the developments this week, despite a number of high-level meetings held to discuss the proposal over the past week by industry leaders.
A spokesperson for Ornua said: “There is an on-going governance review process in progress. All board directors are fully engaged in the process and have the interests of all key stakeholders at front of mind. The process will take some time to complete.”
What’s behind the
Ornua restructure?
It seems that board dysfunction is at the core of the restructuring proposal and that this dysfunction is preventing Ornua from delivering to its optimum. Growing pains related to the 50% growth in milk supply across the industry along with member co-ops developing their own routes to market directly are likely to be some of the reasons for the conflicts at board level.
These conflicts came to a head towards the end of last year after Glanbia announced it was launching its own Truly Grass Fed brand into the US.
Despite Glanbia stating it would grow the market in the US, it was seen by many as a direct competitor to Ornua’s Kerrygold brand in that market. It led to many board members having to step out for elements of board meetings due to potential conflicts of interest. This had made the board meetings almost unworkable, according to sources around the board table.
While the Glanbia move is not the sole reason for the shakeup, it no doubt was the catalyst for the board to initiate a complete governance review. This review process, which was headed up by the then chair Aaron Forde, was initiated late last year. However, a solution had not been found six months on. At last month’s board meeting Forde stepped down as chair and was replaced by independent chair Denis Cregan. Professional services firm Deloitte was appointed by the Ornua board to find a solution around the governance issues.
At the same time, over the last number of months it appears Dairygold took matters into its own hands and engaged corporate finance firm Goodbody and legal experts McCann Fitzgerald along with Deloitte in Cork (from a tax view point) to identify a model to move the process forward.
While Dairygold, which holds around 20% in Ornua, declined to comment, it is believed it was concerned around the progress of the governance review and that it may have been “choking the business”. It is understood that a number of meetings were held last week by senior officials in the dairy industry to try to find a path forward. It is also understood that the board is now considering the proposal in greater detail and that co-op members have been asked to communicate to their own boards around the proposals.
Industry sources have told the Irish Farmers Journal that it is expected to have the process concluded by the end of the year. That means the members of Ornua will be acting rapidly on this. An Ornua SGM is likely to be required along with each member co-op engaging with their respective boards and members. While this is very much a proposal, it seems there will be lots of debate around it in the coming months.
As exclsuively revealed on farmersjournal.ie this week, the board of Ornua is considering a restructuring proposal which would see shares in the organisation to the value of €100m given to eligible milk suppliers.
The proposal, which was presented to the board of Ornua by Dairygold last Friday, would see Ornua restructure from a co-op to an unlisted plc. Ornua is currently owned by the processing member co-ops. Under the proposed restructuring, existing member co-ops would directly own 80% of the new entity while eligible dairy farmers would own the remaining 20%. Based on Ornua’s valuation (net asset value on the balance sheet) of €520m at the end of 2018, farmers would be allocated shares to the value of €104m.
Creating an unlisted plc is different to the path Kerry and Glanbia took in the past when they floated on the stock exchange and listed as full plcs. An unlisted plc is not on a public stock exchange but its shares can be traded on an internal share trading mechanism solely for co-ops and farmers. Importantly for farmers, the proposal outlines Ornua would remain in exclusive ownership of the member dairy co-ops and dairy farmers.
Based on the estimated 13,500 dairy farmer suppliers to Ornua, this would see each eligible milk supplier on average receive shares to the value of €7,500.
Dairy farmers who supply Kerry Group would not be entitled as Kerry left Ornua a number of years ago.
Documents seen by the Irish Farmers Journal outline that the proposal would give dairy farmers an ownership value of up to 2c per litre based on their 2018 milk supply. That would mean a 100-cow dairy farmer supplying 500,000 litres would receive shares to the value of €10,000.
The member co-ops of which there are around 34 members would receive around €416m in shares based on last year’s valuation.
The co-op members would benefit by unlocking the value that has built up in Ornua by taking their share of the €416m on to their respective balance sheets.
The shares will be given out based on their current shareholding in Ornua. For example, Glanbia owns around 25% of Ornua today with Dairygold owning a further 20%. Other processors such as Lakeland, Arrabawn, the west Cork co-ops and Aurivo also hold significant shareholdings. In total there are 34 co-ops that hold some stake in Ornua.
Board shake-up
Under the proposal, it is recommended that a 25-member advisory council be set up made up of farmers from the shareholding co-ops and the farm organisations – IFA and ICMSA along with ICOS. It is believed that five people from this advisory council would be put forward to the main board of Ornua.
The new board of Ornua would see the existing board resign to be replaced by the five nominees from the advisory council along with five independent directors and two nominated from the farm organisations.
The board of Ornua has remained tight-lipped on the developments this week, despite a number of high-level meetings held to discuss the proposal over the past week by industry leaders.
A spokesperson for Ornua said: “There is an on-going governance review process in progress. All board directors are fully engaged in the process and have the interests of all key stakeholders at front of mind. The process will take some time to complete.”
What’s behind the
Ornua restructure?
It seems that board dysfunction is at the core of the restructuring proposal and that this dysfunction is preventing Ornua from delivering to its optimum. Growing pains related to the 50% growth in milk supply across the industry along with member co-ops developing their own routes to market directly are likely to be some of the reasons for the conflicts at board level.
These conflicts came to a head towards the end of last year after Glanbia announced it was launching its own Truly Grass Fed brand into the US.
Despite Glanbia stating it would grow the market in the US, it was seen by many as a direct competitor to Ornua’s Kerrygold brand in that market. It led to many board members having to step out for elements of board meetings due to potential conflicts of interest. This had made the board meetings almost unworkable, according to sources around the board table.
While the Glanbia move is not the sole reason for the shakeup, it no doubt was the catalyst for the board to initiate a complete governance review. This review process, which was headed up by the then chair Aaron Forde, was initiated late last year. However, a solution had not been found six months on. At last month’s board meeting Forde stepped down as chair and was replaced by independent chair Denis Cregan. Professional services firm Deloitte was appointed by the Ornua board to find a solution around the governance issues.
At the same time, over the last number of months it appears Dairygold took matters into its own hands and engaged corporate finance firm Goodbody and legal experts McCann Fitzgerald along with Deloitte in Cork (from a tax view point) to identify a model to move the process forward.
While Dairygold, which holds around 20% in Ornua, declined to comment, it is believed it was concerned around the progress of the governance review and that it may have been “choking the business”. It is understood that a number of meetings were held last week by senior officials in the dairy industry to try to find a path forward. It is also understood that the board is now considering the proposal in greater detail and that co-op members have been asked to communicate to their own boards around the proposals.
Industry sources have told the Irish Farmers Journal that it is expected to have the process concluded by the end of the year. That means the members of Ornua will be acting rapidly on this. An Ornua SGM is likely to be required along with each member co-op engaging with their respective boards and members. While this is very much a proposal, it seems there will be lots of debate around it in the coming months.
SHARING OPTIONS