Glanbia plc and the UK's Milk Link are set to form a new joint venture company to serve the UK cheese market. Cheese Company Holdings will be 75% owned by Milk Link and 25% by Glanbia.
Glanbia also announced this morning that it will sell 100% of Glanbia Foods to the new venture, CCH, for €140.1m.
Glanbia says it will use the proceeds from the transaction to invest in growth opportunities in its core markets.
Both parties have agreed to provide further financial support for the new venture. Glanbia will contribute a total of €13.1m in the form of a share premium spread over four years. Milk Link will contribute an annual amount of £2.5m in connection with the exclusive milk supply contract with Glanbia Foods.
CCH will be the second largest cheese producer in the UK, with strong positions in cheddar, Stilton and British territorial cheeses. It will supply the retail, food service and ingredient sectors and will operate four cheese processing facilities and a consumer packing facility in the UK. It employs 1,000 people.
Glanbia said it expects the sale of Glanbia Foods to result in an exceptional charge of €49.1m for the year ended January 2004. €8.1m will relate to a write down of assets and €10.5m relates to debt restructuring, a contractual lease and transaction costs.
The effect of the transaction on the earnings of the Group is expected to be broadly neutral, a statement from Glanbia said.
The deal is conditional on approval by the Irish competition authorities and the Milk Link Member Council. The company said it expected that these conditions will be fulfilled and the transaction completed by the end of March.
Glanbia shares were down five cent to €2.45 in Dublin this afternoon.
