Disposal

RNS Number : 4368K

Glanbia PLC

20 April 2010

 



AGREEMENT TO DISPOSE OF IRISH DAIRY AND AGRI BUSINESSES

20 April 2010- Glanbia plc ("Glanbia" or "the Company" or "the Group"), the international nutritional ingredients and cheese group, announces that it has conditionally agreed to dispose of its Irish Dairy and Agri Businesses to Glanbia Co-operative Society Limited ("the Society"), its 54.6 per cent shareholder (the "Disposal").

Key information summary:

·      The Irish Dairy and Agri Businesses comprise three principal business units, Dairy Ingredients Ireland, Consumer Products and Agribusiness, as well as Glanbia Estates, Group Business Services and Irish Joint Ventures and Associates;

·      The Disposal Proceeds comprise the proceeds of the placing of 102 million Glanbia shares held by the Society (the "Placing Value"), adjusted by the Risk Sharing Adjustment as described below and cash of €49.7 million (the "Cash Component");

·      Glanbia and the Society have agreed a risk sharing mechanism in relation to the Placing Value. The Placing Value will be adjusted by an amount equal to one half of the difference between the Net Placing Price (the proceeds of the Placing, net of all costs, calculated as a per share amount) and €2.65 multiplied by 102 million shares. To the extent the Net Placing Price exceeds €2.65, the Placing Value will be adjusted downwards; to the extent the Net Placing Price is less than €2.65, but greater than €2.25, the Placing Value will be adjusted upwards ("the Risk Sharing Adjustment");

·      The Disposal Proceeds will be subject to a euro-for-euro working capital adjustment reflecting the difference between the level of working capital in the Irish Dairy and Agri Businesses at completion and €75.3 million (the "Working Capital Adjustment"). Based on the normal working capital cycle for the Irish Dairy and Agri Businesses, working capital at Completion is expected to be approximately €150 million which would result in a Working Capital Adjustment of approximately €74.7 million;

·      Using the closing price of €3.10 at 16 April 2010 as an illustrative Net Placing Price, the Disposal Proceeds would be as follows:

TABLE 1

Component	Description	€ million
Placing Value	Illustrative Net Placing Price of €3.10 multiplied by 102 million shares	316.2
Risk Sharing Adjustment	€3.10 less €2.65 per share multiplied by 102 million shares divided by 2	(22.9)
Cash Component	Agreed cash consideration	49.7
Disposal Proceeds		343.0

·      The Disposal is conditional on the Disposal Proceeds being no less than €299.6 million ("the Minimum Proceeds");

·      Following the Placing, the Society will have an approximate 20 per cent shareholding in Glanbia (down from 54.6%);

·      During September 2010, the Society intends to transfer circa 50 per cent of its remaining shareholding directly to members, representing 28.5 million shares. This will result in a Society shareholding in Glanbia plc of circa 10 per cent;

·      The Society will undertake all employment obligations in relation to the employees of the Irish Dairy and Agri Businesses and the full obligations as the sponsoring employer of the relevant Irish pension schemes relating to these businesses. As of 2 January 2010, these pension schemes showed a pension deficit of €48.7 million on an accounting IAS 19 standard basis;

·      The transaction is conditional in the first instance upon the approval of the members of the Society. In addition, completion of the Disposal is conditional on the approval by shareholders of Glanbia plc (excluding the Society and its associates) of the Disposal in accordance with the Listing Rules. The Disposal is also conditional upon the completion of the Placing;

·      A circular, prepared in accordance with the Listing Rules, will be posted to shareholders shortly. Shareholder approval will be sought at an extraordinary general meeting of the Company to be held at Lyrath Estate Hotel, Dublin Road, Kilkenny, Ireland on 25 May 2010 at 11 am;

·      The Disposal is expected to be completed no later than 15 June 2010;

·      As a consequence of the Disposal, the Society's representation on the Board of Glanbia will reduce to two Directors out of a Board of nine Directors for six years after the Completion date and to one thereafter, subject to a minimum shareholding of seven per cent;

·      Following the transaction, Glanbia will be an international nutritional ingredients and cheese group headquartered, managed and controlled in Ireland, and the Society will have full ownership and control of the Irish Dairy and Agri Businesses; and

·      The Board believes that the Disposal will strengthen Glanbia's balance sheet and provide financial flexibility to allow the Group to develop its international business operations further and fulfil its growth potential in the nutritional ingredients and cheese markets.

Current trading and prospects for the first half

Since the beginning of the year the improvement in the Group's operating environment continues. This is benefiting Glanbia's performance overall and, combined with an ongoing cost reduction focus and operational excellence, is expected to deliver a marked improvement in the first half, mainly as a result of a recovery in Dairy Ingredients Ireland. This compares with an exceptionally difficult first half in 2009.

Commenting today, John Moloney, Group Managing Director of Glanbia plc said:

"In a changed global dairy market environment, the time and opportunity is now at hand to recognise and embrace the need for transformation. This transaction provides the prospect of reshaping the business and unlocking growth and development potential for both the Society and the Company. For Glanbia it has compelling strategic logic and creates a focused business with a well established growth strategy, underpinned by improved financial flexibility. For the Society, achieving full control of the Irish Dairy and Agri Businesses, will create a dynamic organisation focused on driving growth and development for farmer members."

Commenting today, Liam Herlihy, Chairman of the Group and the Society said:

"The last few years have demonstrated that global dairy markets and the Irish dairy sector are in a period of profound change. A unique opportunity exists for the Society to build a new strategy, structure and business model that best serves the interests and needs of our members. In particular, there is an exciting opportunity to expand Irish milk output in the context of emerging changes in EU regulation of the industry. Gaining ownership and control of key strategic Irish assets puts members in an excellent position to capitalise on these changes and the Board of the Society looks forward to the successful completion of this transaction and to building a sustainable future for all our members."

Analyst and investor call

Glanbia will hold two conference calls for analysts and institutional investors today at 8 a.m and 2.30pm. These calls may be accessed on:

Tuesday 20 April 2010

8.00am Irish Summer Time

UK dial in                   0208 974 7940

Irish dial in                 01 2421074

International dial in     [phone]

Passcode                    750251

Replay details

Dial in                        [phone]

Passcode                    55531360

Tuesday 20 April 2010

2.30pm Irish Summer  Time

UK dial in                    0208 974 7940

Irish dial in                  01 2421074

International dial in      [phone]

Passcode                     750251

Replay details

Dial in                         [phone]  

Passcode                     44888398          

An accompanying presentation will be available on http://www.glanbia.com/reports-presentation.

A replay facility will be available later in the day for one month. This can be accessed on [phone], pass code 73132684.

DETAILED TRANSACTION INFORMATION

20 April 2010 - Glanbia plc ("Glanbia" or "the Company" or "the Group"), the international nutritional ingredients and cheese group, announces that it has agreed to sell its Irish Dairy and Agri Businesses to Glanbia Co-operative Society Limited ("the Society"), its 54.6 per cent shareholder.

The Irish Dairy and Agri Businesses comprise three principal business units, Dairy Ingredients Ireland, Consumer Products and Agribusiness, as well as Glanbia Estates, Group Business Services and Irish Joint Ventures and Associates. The Society will undertake all employment obligations in relation to the employees of the Irish Dairy and Agri Businesses and the full obligations as the sponsoring employer of the relevant Irish pension schemes relating to these businesses. As of 2 January 2010, these pension schemes showed a pension deficit of €48.7 million on an accounting IAS 19 standard basis.

Following the transaction, Glanbia will be a nutritional ingredients and cheese group headquartered, managed and controlled in Ireland, and the Society will have full ownership and control of the Irish Dairy and Agri Businesses. 

The Society will fund the acquisition with the placement of a significant proportion of the Society's shareholding in Glanbia and through debt. The Placing will result in a reduction in the Society's shareholding in Glanbia to approximately 20 per cent. The Society has indicated that it intends to transfer approximately 10 per cent of the issued share capital of Glanbia directly to Society members in September 2010.

By virtue of the size of the Disposal relative to the size of the Company, completion of the Disposal is conditional on the approval by shareholders of Glanbia plc of the Disposal in accordance with the Listing Rules. As the Society is a significant shareholder in Glanbia, the proposal also constitutes a related party transaction under the Listing Rules, and consequently the Society is not permitted to vote on the resolution approving the Disposal and those Directors on the Board, who are also directors of the Society, have not taken part in the Board's consideration of the Disposal. Shareholder approval will be sought at an extraordinary general meeting of the Company to be held at Lyrath Estate Hotel, Dublin Road, Kilkenny, Ireland on 25 May 2010 at 11 a.m. The Disposal is expected to complete no later than 15 June 2010.

Background to and reasons for the Disposal

Over the past number of years, Glanbia has focused on the following strategic objectives through its international growth strategy:

§  Developing a more diversified earnings base;

§  Achieving a sustainably higher operating margin;

§  Allocating capital to a mix of higher growth opportunities; and

§  Delivering continuous double digit earnings growth.

This focus has resulted in significant change for the Group and has transformed Glanbia into a substantial participant in the US cheese and global nutritionals markets.

During the same period, global dairy markets and the Irish dairy sector experienced significant change. The complex interplay of regulatory, supply and demand factors has led to a marked increase in the level and scale of price volatility in global dairy markets. With volatile pricing in end-product dairy markets, dairy processor margins are heavily impacted by the pace and scale of adjustments in the price of milk, the primary raw material input. 

As part of the most recent annual strategic planning process, undertaken in late 2009, the Board reviewed the overall strategic plans and direction for Glanbia and in particular for the Irish Dairy and Agri Businesses, recognising the difficulties of the challenging milk supply pricing dynamic in Ireland and its potential impact on the Group's ability to deliver consistent earnings growth. This review also confirmed that an attractive set of opportunities existed in pursuing the international growth strategy in US cheese and global nutritional markets and the Board concluded that the financial flexibility of the Group should be improved to allow it to pursue these opportunities.

In November 2009, the board of the Society, following its own strategic review, informed the Board of Glanbia plc that it had identified the proposed acquisition of the Irish Dairy and Agri Businesses as a strong strategic opportunity for the Society and its members.

An Independent Committee of the Glanbia Board, made up of the non-Society nominated Directors, was formed to consider this proposal. Following careful consideration by the Independent Committee, the disposal of the Irish Dairy and Agri Businesses to the Society was considered to meet the Group's strategic objectives to reduce earnings volatility, strengthen its balance sheet and provide financial flexibility to fulfil its growth strategy in the US cheese and global nutritionals markets.

Independent financial advisors were appointed by both parties and the process resulted in the Board agreeing the Disposal. The Board believes that the disposal of the Irish Dairy and Agri Businesses will strengthen Glanbia's balance sheet and provide financial flexibility to allow the Company, its subsidiary undertakings and joint ventures following the Disposal (the "Continuing Group") to develop its international business operations further and fulfil its growth potential.

Disposal Proceeds

The amount of the Disposal Proceeds which will be received from the Disposal is the sum of the following:

i.    The Proceeds of the sale of 102 million Glanbia plc shares owned by the Society (the "Placing Value") plus or minus the Risk Sharing Adjustment outlined below and subject to the adjustments described below where the number of Glanbia shares placed is greater or less than 102 million; and

ii.   Cash of €49.7 million (the "Cash Component'').

The Disposal Proceeds will be subject to an adjustment upwards or downwards on a euro-for-euro basis by the amount by which the level of working capital in the Irish Dairy and Agri Businesses at Completion exceeds €75.3 million. Based on the normal working capital cycle for the Irish Dairy and Agri Businesses, working capital at Completion is expected to be approximately €150 million which would result in a Working Capital Adjustment of approximately €74.7 million. The parties have agreed that the working capital will be calculated for this purpose as at 29 May 2010.

Risk Sharing Adjustment

Glanbia and the Society have agreed a risk sharing mechanism in relation to the Placing Value. The Placing Value will be adjusted by an amount equal to one half of the difference between the Net Placing Price (the proceeds of the Placing, net of all costs, calculated as a per share amount) and €2.65 multiplied by 102 million Shares. To the extent the Net Placing Price exceeds €2.65, the Placing Value will be adjusted downwards; to the extent the Net Placing Price is less than €2.65, but greater than €2.25, the Placing Value will be adjusted upwards ("the Risk Sharing Adjustment").

Adjustment in number of shares to be placed

The Society may sell more than 102 million shares but subject to a maximum of 107 million shares in which case the Risk Sharing Adjustment applies in respect of 102 million shares but does not apply in respect of the excess shares placed over this figure. In respect of the excess shares, the Cash Component will be reduced by the number of excess shares multiplied by the Net Placing Price.

The Society may sell less than 102 million Shares but subject to a minimum of 97 million shares, in which case the Risk Sharing Adjustment applies in relation to the number of shares that are placed but does not apply in respect of the shortfall between the number of shares placed and 102 million shares. In respect of the shortfall shares, the Cash Component will be increased by an amount equal to the shortfall number of shares multiplied by €2.65 regardless of the Net Placing Price.

The price of the Glanbia shares to be offered in the Placing will be determined only on completion of a competitive book-building process. It is intended the that final determination of the Placing Price will be made by the respective Boards of the Company and the Society in consultation with their advisers and will be based on the nature and level of demand for the shares. The final amount of the Disposal Proceeds due to Glanbia for the Irish Dairy and Agri Businesses will be determined once a value has been set for the Glanbia shares in the Placing.

As an illustration, based on an indicative Net Placing Price of €3.10 (being the closing share price of Glanbia ordinary shares on the Irish Stock Exchange on 16 April 2010) the Disposal Proceeds received by Glanbia would be €343 million (excluding the Working Capital Adjustment). This would comprise the proceeds of the sale of 102 million Glanbia Shares at €3.10 per share (i.e. €316.2 million), cash of €49.7 million, reduced by €22.9 million per the Risk Sharing Adjustment, as outlined in Table 1.

As the Company's share price can vary between now and the Placing the Board of Glanbia is asking shareholders to authorise it to complete the Disposal on the basis of Minimum Proceeds (excluding the Working Capital Adjustment) of €299.6 million. 

Use of proceeds and financial effects of the transaction

The net proceeds from the Disposal will be used to reduce Glanbia's net debt which amounted to €442.6 million at 2 January 2010. Using the illustrative Disposal Proceeds in Table 1 above, the pro-forma net debt of the Continuing Group at that date would have been €116.4 million. This will increase Glanbia's financial flexibility and enable the Continuing Group to implement its growth strategy.

The surplus from the Disposal (which the Directors estimate at approximately €80.7 million), will be determined post Completion and will be reflected in the Group's accounts for the year ended 1 January 2011. Following the Disposal the Continuing Group will no longer benefit from operating profits generated by the Irish Dairy and Agri Businesses. Glanbia's operating profit before exceptional items for the year ended 2 January 2010 included €21.3 million in respect of the Irish Dairy and Agri Businesses. Accordingly, the Directors expect that the Disposal will be earnings dilutive on a pre-exceptional basis in the current financial year.

Information on Irish Dairy and Agri Businesses

While the Irish Dairy and Agri Businesses delivered a solid performance in 2007 and 2008, 2009 was a very challenging year. Revenue declined 24 per cent to €1,037.9 million (2008: €1,357.0 million), operating profit pre exceptional items and excluding share of Irish Joint Ventures and Associates was down 57 per cent to €21.3 million (2008: €49.9 million) and the operating margin was 160 basis points lower at 2.1 per cent (2008: 3.7 per cent). 

The following information summarises the trading results of the Irish Dairy and Agri Businesses for the years ended 29 December 2007, 3 January 2009 and 2 January 2010 and has been extracted without material adjustment from the consolidation schedules that underlie the Glanbia audited consolidated financial statements:

Irish Dairy and Agri Businesses	2009	2008	2007
	€'000	€'000	€'000
Revenue	1,037,934	1,356,975	1,244,468
Operating profit	21,298	49,904	53,926
Share of Irish Joint Ventures and Associates post interest and tax	799	240	379

The proposal to dispose of the Irish Dairy and Agri Businesses is exclusive of any existing net cash balances and non-trading intercompany balances.  As at 2 January 2010, the Irish Dairy and Agri Businesses had net assets of €242.7 million and gross assets of €490.1 million (both amounts are exclusive of non-transferring net cash and non-trading intercompany balances).

Dairy Ingredients Ireland

Dairy Ingredients Ireland is the largest dairy ingredients business in Ireland, assembling a milk pool of approximately 1.4 billion litres annually and processing it into butter, cheese, milk proteins and whey derivatives. It sells approximately 190,000 tonnes of dairy products and ingredients on a business-to-business basis to customers in 50 countries. Dairy Ingredients Ireland employs 476 full time employees principally at two large processing facilities at Ballyragget, County Kilkenny and Virginia, County Cavan.

The Ballyragget facility is the largest integrated dairy site in Europe, processing approximately 26 per cent of the Irish milk pool in addition to a significant whey volume. Dairy Ingredients Ireland is the leading Irish supplier of lactose and other whey proteins to some of the largest infant formula manufacturers in the world. It is also Ireland's largest manufacturer of cheddar cheese.

The Virginia facility produces a range of fat-filled milk powders and fresh creams. It is the principal supplier of cream to Baileys Irish Cream Liqueur. It is also the main supplier of milk powders to Nutricima Limited, a joint venture of Glanbia and PZ Cussons plc in Nigeria.  The Group's interest in Nutricima Limited will be retained by the Continuing Group. Fat-filled milk powders are also exported to other West African countries, principally Senegal, Togo, Mali and Benin.

Since November 2005 the Group has owned a 45 per cent interest in a joint venture with Corman SA for the manufacture of butter fractions and dairy spreads in Ireland. Through its wholly owned subsidiary, Zymalact S.A. de C.V. Mexico, and its 50 per cent associate, Conabia de Mexico S.A. de C.V., the Group also has a dairy blending and processed cheese operation in Mexico. Dairy Ingredients Ireland also includes the Group's 22.7 per cent shareholding in the Irish Dairy Board Co-operative Limited.

Consumer Products

This business unit consists of the Group's consumer products business on the island of Ireland, comprising nutritional beverages, fresh dairy products, cheese, soups and spreads sold to the Irish retail and food service sector. Consumer Products employs over 647 full time employees (plus seasonal workers as necessary) at 10 locations in Ireland and processes approximately 275 million litres of milk annually, supplying approximately 2,700 retail and foodservice customers with approximately two million units of product daily. Its principal manufacturing operations are located in Ballytore, County Kildare, Drogheda, County Louth, Inch, County Wexford and Kilkenny City.

Consumer Products principal own brands include 'Avonmore', 'Premier', 'Kilmeaden', 'Snowcream', and 'CMP' and it also uses the following brands under licence, 'Yoplait', 'Yop' and 'Petits Filous' and'Weight Watchers' and it has a distribution agreement for 'Innocent' drinks in the Republic of Ireland.

Agribusiness

The Agribusiness unit is engaged in feed milling, grain processing and the marketing and retailing of a range of farm inputs, including animal feeds, fertilisers, seed grain, chemicals and veterinary products. Agribusiness employs 378 fulltime employees and approximately 100 part time employees and operates predominately in the East and South East of Ireland, with a total of 52 retail outlets, 16 of which operate under the Countrylife brand. Its two animal feed manufacturing sites are located in Portlaoise, County Laois and Clonroche, County Wexford.

Glanbia Estates

Glanbia Estates is the Group's Irish property management business and is engaged in reviewing and maximising the value of the Group's portfolio of Irish properties with a particular focus on surplus property. It employs 3 people.

Group Business Services

This operation supplies administrative back office (accounts payable, accounts receivable, Ireland and UK payroll) and information technology support to the Group and operates in Ireland. It employs over 130 employees. Under the IT and Shared Services Agreement the Society will continue to supply these support services to the Continuing Group.

Irish Joint Ventures and Associates

The proposed Disposal also includes the Group's Irish Joint Ventures and Associates made up of its 49 per cent shareholding in South East Port Services Limited, 57 per cent shareholding in South Eastern Cattle Breeding Society Limited, 33.33 per cent shareholding in The Malting Company of Ireland Limited, 50 per cent shareholding in Co-operative Animal Health Limited, 33.33 per cent shareholding in Greenfield Dairy Partners Limited and 45 per cent shareholding in Corman Miloko Ireland Limited.

Information on the continuing group

The Group is currently structured into three main divisions: US Cheese & Global Nutritionals, Dairy Ireland and Joint Ventures & Associates. The Joint Ventures & Associates division consists mainly of Southwest Cheese Company LLC, Glanbia Cheese Limited and Nutricima Limited. Post Completion, the Continuing Group will comprise the US Cheese & Global Nutritionals division and the above Joint Ventures & Associates. The Continuing Group has 17 processing sites and 19 sales offices in 15 countries worldwide.

The Pro Forma information in the table below summarises the trading results of the Continuing Group for the year ended 2 January 2010:

Continuing Group	2009
	€'000
Revenue	792,393
Operating profit	89,868
Share of JV & Associates post interest and tax	9,426

Following the disposal the Continuing Group will report as two divisions: Cheese and Global Nutritionals. The revenue and operating profit for Cheese and Global Nutritionals on a segmental basis (excluding the Joint Ventures & Associates) for the year ended 2 January 2010 are as follows:

2009	Cheese	Global Nutritionals	Continuing Group
	€'000	€'000	€'000
Revenue	407,317	385,076	792,393
Operating profit	27,795	62,073	89,868
Operating margin	6.8%	16.1%	11.3%

Cheese

The Cheese division will encompass the Glanbia wholly owned US cheese business based in Idaho USA and two cheese joint ventures: Southwest Cheese LLC, a New Mexico, US based joint venture with a collection of milk co-operatives based in Clovis, New Mexico, USA and Glanbia Cheese Limited, a UK based joint venture with Leprino Foods, USA.

US cheese

Glanbia's US cheese business manufactures and markets cheese on a business-to-business basis predominantly in the US. The business operates from five sites with over 635 fulltime employees. The strategic objectives of the US cheese business are to continue to expand its low cost large scale operating model which is capable of delivering quality dairy products at a competitive price, while continuing to build long term relationships with market leading customers.

According to the US Department of Agriculture, the US cheese market is approximately 1.9 million metric tonnes in size. Glanbia's history in the US cheese market substantially began in 1990 when it acquired Wards Cheese in Idaho. Over the last 10 years it has invested significantly in the expansion of its cheese production capacity. In 2009, the division processed over 1.9 billion litres of milk into approximately 200,000 tonnes of American style cheese, from its facilities in Idaho.

The US cheese business has developed a strong footprint in western USA where it has developed trading relationships with low cost, scale milk producers. The business purchases over one third of the milk produced in Idaho the pricing for which is based on the end products produced by the business. Idaho is the fourth largest milk producing state in the USA and is amongst the fastest growing states for milk production. 

Southwest Cheese (USA)

Southwest Cheese, located in Clovis, New Mexico, USA is a 50:50 joint venture between Milk Member, LP, a partnership of milk co-operatives in the southwestern USA and Glanbia, Inc, a wholly owned subsidiary of Glanbia. Located in Clovis, New Mexico, USA Southwest Cheese is a modern cheese and whey production facility and is one of the largest natural cheese and high protein whey processing plants in the world. The business is in its fourth year of operation and in 2009 produced approximately 140,000 tonnes of American style cheddar cheese and approximately 8,700 tonnes of high protein whey. Glanbia is the operating partner and markets all of the products produced by Southwest Cheese. Southwest Cheese employs over 320 employees. In 2009, Southwest Cheese announced a US$85 million expansion of the Clovis facility. The expansion project will increase the capacity of the cheese and whey plants by 40 per cent when fully commissioned later this year.

Glanbia Cheese (UK)

Glanbia Cheese is 51 per cent owned by Glanbia and is a joint venture with Leprino Foods,Company, USA. The business produces mozzarella cheese for the European pizza market in shredded, ribbon and string formats and is a leading supplier of mozzarella cheese to the foodservice and retail pizza sector. Glanbia Cheese employs over 322 employees at three sites, which include two cheese processing facilities at Magheralin in Northern Ireland and Llangefni in Wales. It sold over 58,000 tonnes of mozzarella cheese in 2009.

Global Nutritionals

The Global Nutritionals division will comprise Glanbia's wholly owned nutritionals businesses and Nutricima, its dairy consumer products joint venture with PZ Cussons plc which is based in Nigeria.

Global Nutritionals is a leading supplier of advanced technology whey proteins and whey fractions, vitamin & mineral premix solutions and nutritional supplements serving the health and wellness, functional foods, sports nutrition, infant and clinical nutrition sectors. The division employs over 980 employees at locations in Ireland, USA, Canada, Europe, Asia Pacific and South America.

The foundation of Glanbia's Global Nutritionals business is the Group's large scale efficient whey processing facilities in Idaho. In conjunction with the development of its US cheese operations Glanbia has invested significant capital in the last 10 years in developing large scale facilities for the manufacture of value-added whey protein ingredients. From this base Glanbia has expanded its Global Nutritionals business both organically and through acquisition. In parallel, Global Nutritionals has developed a significant research & development infrastructure both in the US and Ireland as well as a global sales capability. Global Nutritionals now comprises three business units:

·      Ingredient Technologies - develops markets and sells whey based ingredients and whey based solutions on a business-to-business basis. Its main sales office is in Madison, Wisconsin, USA. The Continuing Group's US cheese business and its Southwest Cheese joint venture are the primary source of whey products. Glanbia Nutritionals Canada, the Group's flax business, is also included in this business;

·      Customised Premix Solutions - provides micro nutrients and premix solutions on a business-to-business basis mainly to the infant formula, supplements and beverage sectors; and

·      Performance Nutrition - manufactures and markets nutritional supplements serving the sports nutrition sector and mainly comprises the Optimum Nutrition business.

Global Nutritionals holds leading positions in the US sports nutrition brand market, the WPI and customised whey ingredient solutions market as well as the customised premix solutions market. The businesses have a direct presence in the US and internationally and a route to market for innovative nutritional applications and solutions. The strategic objectives include continued expansion both organically and by acquisition and the development of new and innovative products and solutions that will afford Glanbia a point of difference in the marketplace and deliver value to customers.

Nutricima (Nigeria)

Nutricima is a 50:50 joint venture in Nigeria with PZ Cussons plc. Nutricima employs over 345 employees at its facilities near Lagos which produce reconstituted evaporated milk, powder milk packs and ready-to-drink UHT milk products. The production facility was commissioned in May 2005 with powder packing and reconstituted evaporated milk operations. In October 2007 the facility was expanded with the introduction of a second reconstituted evaporated milk line. A new factory manufacturing ready-to-drink products was commissioned in May 2009.  Nutricima sold over 28,000 tonnes of milk products in 2009.

Ongoing relationship with the Society

As a consequence of the Disposal, the Society will reduce its shareholding in Glanbia to approximately 20% of the issued share capital of Glanbia, on Completion. In addition, the Society's representation on the Board of Glanbia will reduce to two Directors out of a Board of nine Directors for six years after the Completion date. This will revert to one thereafter, subject to a minimum shareholding of seven per cent. All nominees of the Society to the Board of Glanbia shall be persons who are approved in advance by the Nominations Committee of the Board. The Society has confirmed that it intends to transfer directly to Society members approximately 10 per cent of the issued share capital of Glanbia in September 2010.

Under the Business Transfer Agreement, the Society and Glanbia will, on Completion, be required to enter into an IT and Shared Services Agreement and a De-branding and Transitional Trade Mark Licence Agreement. The charges for the services under the IT and Shared Services Agreement are not expected to represent a material overhead cost for Glanbia.

Management and employees

Glanbia will retain all employees associated with the business units remaining in the Continuing Group, including the relevant CEO's and senior management teams.

In addition Glanbia will retain all the current executive directors; John Moloney, Group Managing Director, Siobhan Talbot, Group Finance Director and Kevin Toland CEO & President, Glanbia USA & Global Nutritionals. Brian Phelan, Group Human Resources & Operations Development Director will also remain with the Company.

At completion, the Society's nominees on the Board will reduce from fourteen to two directors with the Board of the Continuing Group reducing to nine.

Conditions to completion

Completion of the Disposal is conditional upon:

(i)         the approval of Resolution 1 in the Notice by shareholders of Glanbia (excluding the Society and its associates) at the EGM;

(ii)        the approval of the reduction by the Society of its interest in Glanbia below 51 per cent. of the issued share capital of Glanbia (as contemplated by the Disposal) by a resolution of the Society, which is passed in accordance with Rule 4(h)(ii) (a) at a general meeting of the Society (currently scheduled for 10 May 2010) and (b) at a confirmatory general meeting of the Society to be held no less than 14 days nor more than one month from the first general meeting referred to above (currently scheduled for 24 May 2010);

(iii)       the Placing having been completed at a Net Placing Price of not less than €2.25 and in respect of not less than 102 million Shares, except where the Society has elected to place less than 102 million shares provided that the Minimum Proceeds which are then payable to Glanbia are not less than €299.6 million;

(iv)       Glanbia being satisfied as to the identities of the principal placees;

(v)        the Society having, on the day prior to the passing of Resolution 1 in the Notice by Shareholders, delivered to Glanbia a bank facility letter or letters addressed to the Society as borrower in an aggregate amount of not less than €150 million on market standard terms and conditions as to availability (including a material adverse change condition and  conditions relating to the Completion of the Disposal and completion of the Placing) and which has been approved by the credit committee(s) of the bank(s); and

(vi)       The trustees of the pension schemes relating to the Irish Dairy and Agri Businesses having consented to the substitution of the Society for Glanbia as the principal employer of each of the relevant pension schemes.

If any of these conditions is not satisfied by 15 June 2010 either Glanbia or the Society may terminate the Business Transfer Agreement.

Completion of the Disposal is not conditional upon any regulatory approvals having been obtained.

If Resolution 1 in the Notice is passed at the Extraordinary General Meeting on 25 May 2010, Completion is expected to take place by approximately 15 June 2010.

Transaction timetable

Principal event	2010
First Society Special General Meeting	10 May
Second Society Special General Meeting	24 May
Glanbia plc Extraordinary General Meeting	25 May
Accelerated Book Build relating to the placing	End-May
Transaction completion expected by	15 June

Contact information

Glanbia plc  [phone] 
Siobhan Talbot, Group Finance Director

Murray Consultants

Pat Walsh + 353 87 2269 345/ [phone]

Hogarth (London)

John Olsen / Katie Hunt / Anthony Arthur + 44 207 357 9477

This announcement does not constitute, or form part of, any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any shares in the Company in any jurisdiction in connection with the placing (as described in this announcement) nor shall it form part of it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision in relation thereto.

NONE OF THE ORDINARY SHARES TO BE SOLD AS A RESULT OF PLACING, HAS BEEN OR WILL BE REGISTERED OR OTHERWISE MADE ELIGIBLE FOR A PUBLIC OFFERING UNDER THE SECURITIES LAWS OF ANY JURISDICTION, AND MAY THEREFORE NOT BE OFFERED, SOLD, PURCHASED, RESOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, IN ANY JURISDICTION OTHER THAN IN COMPLIANCE WITH THE SECURITIES LAWS THEREOF.

None of the Ordinary Shares have been or will be registered under the US Securities Act or under any securities laws of any state or other jurisdiction of the US and, subject to certain exceptions, none of these securities may be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, in the US except pursuant to an applicable exemption from the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the US. There will be no public offer of any of these securities in the US.

 

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