IFA President John Bryan said a meeting was held on Friday evening in Portlaoise of IFA elected officers in the Glanbia area, to review independent professional reports from Deloitte corporate finance and Eversheds pension experts regarding the key aspects of the Glanbia JV proposals.
He said the assessments by both experts were reassuring on the key issues IFA had asked them to investigate on behalf of farmers. Subsequent to the discussions, IFA have written to Glanbia seeking clarification on a number of other issues previously raised by IFA.
The IFA Executive Council is meeting this Wednesday and will be deciding on the Association’s position on the Glanbia JV proposals. IFA hopes to have all matters clarified with Glanbia in advance of this meeting.
David O’Flanagan, Corporate Finance Partner in Deloitte, advised the group that he found that, in his opinion, the valuation of assets to be purchased by the JV was very reasonable by normal standards of assessing value, including earnings multiples, and said it compared favourably with similar transactions in the global agribusiness sector.
He further stated that, having had sight of the JV’s financial projections relative to the historical performance of the businesses involved, he was satisfied that the cash flow modelling used by Glanbia for the proposal was robust and credible. He said he was satisfied that the new entity would be in a strong position to meet its financial obligations on the basis of the first proposal alone.
On the pension issue, the Eversheds expert Mr Peter Fahy, whose report was also presented to the group, was given detailed insight from Glanbia into the current provisions of the pension scheme as relevant to the transferring staff. The detailed report covered many aspects of the pension funds, and verified that the Pensions Board had approved under Section 50 a scheme clearly providing reduced benefits and adequate funding, with no obligation on the Employer to make any additional contribution over and above those provided for.
IFA National Dairy Committee Chairman Kevin Kiersey said the JV proposals constituted a very ambitious, well thought out, and fair method to bring back dairy processing into farmers’ control without an excessive burden of debt – a very important move to provide for expansion in advance of the post-2015 era. He said in addition to the crunch issues reviewed by the relevant experts for IFA, it would be helpful for Glanbia to progress a small number of areas, raised by IFA from the early stages of these discussions, to help get a positive vote over the line.
“There is a need for Glanbia to give either an uplift upon repayment, or co-op shareholding, in return for the 2c/l deduction on growth milk. I also believe that no deduction should apply when milk prices fall below 25c/l + VAT. In addition, Glanbia must reassure farmers firmly regarding their ability to continue accessing merchant credit in the same conditions. To help farmers manage volatility, Glanbia must commit to increasing the amount of milk involved in fixed price contracts, and to consult with farmers in developing milk pricing systems which can assist with this also,” he said.
“Finally, I urge Glanbia to intensify its engagement with liquid milk producers through Fresh Milk Producers, to ensure they benefit from fair and robust terms and conditions, including pricing, in their future dealings with the Plc on sales of liquid milk,” he concluded.