Irish dairy company Kerry Group wants to get rid of cooperative

There are many similarities between the two Irish dairy cooperatives, but there are also clear differences. Both cooperatives have a minority interest in a listed company that emerged from them. They are also the largest individual shareholder, but the Kerry cooperative clearly has less input into the entire group than Glanbia. Cooperative Kerry also has fewer members and controls a smaller milk pool. On the other hand, the Kerry group has experienced a more successful expansion and has also drifted further from its original activities than rival Glanbia. The latter company has remained mainly active in dairy, the Kerry Group has developed into a broad taste and food group, as it says itself. It is increasingly moving towards a plant-based profile.

Kerry Group is growing faster than the dairy business
Last year, the Kerry Group grew by 8% to a turnover of €7,8 billion. Of this, €876 million could be booked as profit. A profit of 95,2 cents per share was distributed. That is 8,7 cents more than in 2020. Kerry's dairy branch is in the consumer goods division, which has a turnover of €1,1 billion. This division performed well last year, with turnover growth of 6% and excellent margins, Kerry said. However, it is not the division with the most growth and nor is it the division that Kerry expects the most from. In fact, the dairy activities slow down the growth of the whole. Moreover, the group's top management finds it more difficult for farmers to participate than for ordinary share owners on the stock exchange. That is why the top management wants to get rid of the dairy business.

Not for a friendly price
There are also no emotional considerations for keeping the dairy activities within the company among this group. The option of selling the industry has been discussed several times, initially with the Kerry cooperative. It should have bought out the dairy division through a joint venture, with the cooperative becoming 60% owner and the Kerry Group 40%. But not for a friendly price.
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In the past two years, serious negotiations have been held about the sale of the dairy activities. No agreement has yet been reached. The management of the Kerry Group reportedly wanted to raise €800 million last year, while the cooperative did not want to go beyond around €600 million. For the purchase, the cooperative thought it would use the remaining 12% interest in the group.

Negotiations are costing the chairman
It is unclear exactly what happened during the failed takeover attempts, but they cost long-serving cooperative chairman Mundy Hayes his head. He has been replaced by newcomer Dennis Caroll. He may still be able to bring the privatization to a successful conclusion, but he must act hastily. If it takes too long, another buyer will be sought, he was told. In addition, the Kerry Group no longer wants to give guarantees for the milk price from 2026. Meanwhile, Caroll has more worries on his mind. He must ensure that the different interests are reconciled within the cooperative, which has more than 3.500 active members.

Active against resting members
The active members, who still supply milk and are therefore holders of the 'wet' shares, have an interest in the lowest possible conversion rate, while the no longer active members - around 9.000 units - want the highest possible rate. They would like to collect as much money as possible from the sale of the dairy companies. These companies are mainly concentrated in the south-west of Ireland and control a milk pool of around 1 billion kilos. The entire group has 152 production locations with 22.000 employees spread over 36 countries.