New Irish joint venture for Glanbia

Glanbia plc has signed a memorandum of understanding with its majority shareholder, Glanbia Co-operative Society Limited, to enter into a 40% (Glanbia): 60% (Glanbia Co-op) joint venture with respect to Dairy Ingredients Ireland. Separately, the co-op announced that it intends to seek member approval to reduce its shareholding in Glanbia to 41.4%.
The proposed joint venture incorporates the business and assets of Dairy Ingredients Ireland, a business unit of the Dairy Ireland division of Glanbia, including its 45% share of the Corman Miloko Ireland JV and its 23% shareholding in the Irish Dairy Board. Under the proposed transaction, the new joint venture, to be known as Glanbia Ingredients Ireland will be 60% owned by the co-op and 40% owned by Glanbia. The business, net fixed assets, working capital and liabilities of DII will be transferred to the joint venture, which will also assume the relevant pension obligations of DII.
The existing DII business is the largest dairy ingredients processor in Ireland, assembling a milk pool of 1.6 billion litres and processing it into around 180,000 tonnes of dairy ingredients largely for export to over 50 countries worldwide. In 2011, DII generated revenue of €738 million, operating profit of €33 million and EBITDA of €44 million. As at 31 December 2011, DII had gross assets of €313 million.
There is a compelling strategic logic for the creation of the joint venture for both parties as it facilitates the expansion of dairy processing in Ireland in advance of EU milk quota abolition in 2015, while also ensuring that Glanbia’s financial resources are directed towards business segments that deliver the highest return on capital for all shareholders, the companies say. The opportunity to expand milk production is underpinned by a positive long-term outlook for global dairy markets and the comparative advantage that Ireland enjoys as a grass-based system. It is envisaged that GII will seek to increase existing peak dairy processing capacity by up to 60%; a total investment programme of €180 million to 2020. Planning permission is progressing for a new greenfield facility at Belview, County Kilkenny.

Commenting, John Moloney, Group MD of Glanbia plc says: “The proposed joint venture offers a compelling proposition for all stakeholders for the longer-term as it facilitates the desired expansion of dairy processing by Society members and allows Glanbia to continue to focus on its successful international growth strategy. The abolition of EU milk quotas in 2015 will initiate a new era for milk production and offers increased prospects for the Irish dairy industry through a clear opportunity to expand milk supply. Glanbia already has a number of successful international dairy joint venture operations in the UK, US and Nigeria.”