Farmers across Munster can look forward to a new dawn defined by greater power and more financial freedom as they reap the rewards of a co-operatively owned Kerry Dairy Ireland.
Marking the end of a long-standing tug-of-war between Kerry Group and the Co-op, the return of Kerry Dairy Ireland to farmers has been hailed as a “fundamental win” for milk suppliers across Munster, clearing the path for a new and more equal relationship between the two entities.
The historic deal, which was supported by 82% of eligible members this week, will also see a major economic injection in the Kerry and wider Munster region. It will deliver €1.4bn in value directly to the almost 12,000 members of the Kerry Co-op, an eye-watering amount when compared to its initial investment of just €1.5m in 1974.
Kerry Dairy farmers vote to inject millions into the Munster economy
The €500m deal is not just a win for farmers but also marks a significant milestone for the Kerry Group, allowing it to become solely a taste and nutrition business as the Co-op regains control of dairy processing, freeing up resources for the group’s core business.
Speaking on the deal, Noel Murphy, chairperson of the Irish Creamery Milk Suppliers Association (ICMSA) Dairy Committee, said it will make dairy processing more equitable and farmer-centered.
Mr Murphy, who voted in favour of the deal, said, “It was time to take it back. Suppliers needed certainty and must have control of their future.” The Dairy Committee Chair also noted that whatever profit is made will return to the co-op, which is “ultimately good for farmers,” he told the Irish Examiner.
Last year, Kerry Dairy Ireland delivered sales of €1.3bn, exporting to 58 countries. The company also employs around 1,500 staff, who will transfer with the business now that the deal is approved.
Following the transaction, the value of the co-op’s current shareholding will see shareholders given shares in Kerry Group for 85% of their co-op shareholding. The remaining 15% will be re-invested, with additional borrowings, to acquire Kerry Dairy Ireland in two stages.
Under the agreement, 70% of Kerry Dairy Holdings will be acquired before the end of January 2025 and 30% up to 2035. A value of €350m has been set for the 70% interest based on a total Enterprise Value of €500m.
Financial impact
In addition to the buyback, the deal offers farmers and other shareholders in Kerry Co-op a route to turn €1.4bn worth of shares into cash.
As a result, the deal has the potential to deliver a major economic injection into the Kerry and wider Munster region, which could begin as soon as January.
Up until now, shareholders were reliant on an unofficial or grey market to trade co-op shares, or on redemption schemes run twice yearly.
Kerry Co-op shareholders casted their votes on Monday. Following the deal, shares in Kerry Co-op will be exchanged for Kerry Group shares, allowing shareholders to trade on the stock market and cash in their holdings at a time of their choosing.
“This will have a significant impact,” says Mr Murphy. “This will return money to people’s pockets in a way that hasn’t happened before.
“Some will be spent and others will decide to hold their shares, for which they will receive dividends, ultimately resulting in an even larger injection for the Kerry and wider Munster area.” Farmer William Dennehy from Currow in County Kerry echoes Mr Murphy’s comments, calling the deal a “fundamental win” for co-op members.
The Three Key issues
Mr Dennehy, who also voted in favour of the proposal, said the deal addressed “three key issues” facing farmers.
“The co-op and Kerry Group were caught up in arbitration for years. It had to be put to bed. This deal does that.
“The second issue is that of the initial investors who put money into Kerry Group back in the 1970s. This frees up their shares and allows them to cash in if they wish. That is another positive.
“Finally, it helps keep young farmers in the industry and sets out a path forward for the future of milk suppliers.
“These are the three key issues and this proposal addresses every single one. For me, it was a no-brainer.” Mr Dennehy also noted the positive impact the deal will have on the local economy, adding: “This proposal will unlock a deal of wealth for people.
“This will allow people to invest in their farms, put their children through education and help put them on the property ladder.
“This is a good day for farmers. The impact this will have on Munster will be huge.” Kerry Dairy Ireland is a leading dairy and ingredients business, boasting six manufacturing facilities across Ireland and the UK.
The business has a wide portfolio of dairy food brands, including Cheestrings, Dairygold, EasiSingles, LowLow, Kerrymaid, and Charleville.
The company processes more than 1.1bn litres of milk annually, from 2,740 family farms in Munster.
This week’s transaction marks the latest takeover by a major co-op, mirroring that of Avonmore Co-op which entered the North American cheese market before merging with Waterford Co-op to become Glanbia.
Similarly, Tirlán, which took over 40% of Glanbia Ireland from Glanbia plc, marking the largest acquisition by an indigenous Irish company in 2022, delivered strong results in its first year since the split, delivering €44.6m in pre-tax profits.
The co-op also saw a €168m spin-out of shares to more than 11,000 Tirlán Co-Op members, with a dividend of more than €6.5m being paid following its establishment as a fully farmer-owned business.
In a similar vein, South Western Services (SWS) in Cork accepted a €64m offer from IAWS Co-op in 2005 for its business outsourcing and energy divisions.
But the value of these deals is still dwarfed by the €500m price tag for Kerry Dairy Ireland, which marks one of the largest corporate deals ever in the Irish agricultural sector.
However, this week’s deal is not only a hugely significant transaction in Irish corporate history. In addition to benefiting from the financial injection arising from the deal, farmers can also look forward to a new era of greater control and power, coupled with the comfort of knowing that the future of Munster’s dairy industry is well secured.