Irish nutritional solutions and cheese firm Glanbia has entered into an agreement to sell 60% stake in its dairy ingredient division – Dairy Ingredients Ireland (DII) - to its largest shareholder Glanbia Co-op Society, in a €44.5m deal.
The agreement to divest the stake to Glanbia Co-op Society, a farmer-led cooperative which owns 54.4% of Glanbia, is a part of a Glanbia's strategy to focus on international growth.
DII is a largest dairy ingredients processor in Ireland, collecting of 1.6 billion litres of milk and processing it into c.180,000t of dairy ingredients, primarily for export to about 50 countries worldwide.
In 2011, the company posted revenues of €738m, operating profit of €33m and EBITDA of €44m, and as of December 2011, it had gross assets of €313m.
Following the deal, the parties will form a new joint venture, under which Glanbia will hold 40% in DII, while Glanbia Co-op Society will hold 60%.
This deal needs to gain the agreement of 50% of Glanbia Co-op Society members - lower than the 75% limit required in a similar vote in 2010, when the Society failed to achieve the approval.
With the formation of the new joint venture, which will be known as Glanbia Ingredients Ireland (GII), both the parties will seek to expand the dairy processing in Ireland.
About €180m will be invested in the joint venture to boost the existing peak dairy processing capacity by up to 60%.
Glanbia noted that proceeds from the sale of the 60% shareholding will be used to repay existing bank facilities, and added that the transaction is not expected to have a materially dilutive effect on its adjusted earnings per share.
In a separate announcement, Glanbia Co-op Society said that it is planning to reduce its shareholding from in Glanbia from 54.4% to 41.4%, by selling 6% stake and distributing a further 7% of the share capital to society members, in order to part-fund its investment.