Glanbia Regulatory News (GLB)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Glanbia plc announces proposals to sell 60% of Dairy Ireland to Glanbia Co-operative and create strategic joint venture Glanbia Ireland

22 February 2017, Glanbia plc ("Glanbia" or the "PLC") and Glanbia Co-operative Society Limited ("Glanbia Co-op" or the "Co-op") have today announced they have signed a non-binding memorandum of understanding ("MOU") for the sale of a 60% interest in Glanbia's Dairy Ireland segment to Glanbia Co-op (the "Proposed Transaction"). Dairy Ireland is currently 100% owned by Glanbia plc and is comprised of two business units, Glanbia Consumer Foods Ireland and Glanbia Agribusiness.

Glanbia plc and Glanbia Co-op have agreed that they intend to form a new entity, "Glanbia Ireland", which will encompass Glanbia Ingredients Ireland, Glanbia Consumer Foods Ireland and Glanbia Agribusiness, as a strategic joint venture which will be 60% owned by Glanbia Co-op and 40% owned by Glanbia plc.

Commenting today, Siobhan Talbot, Group Managing Director of Glanbia said:

"The creation of Glanbia Ireland makes strategic sense for the shareholders of both Glanbia Co-op and Glanbia plc. It brings together in a single structure the ownership, operations and objectives of Glanbia's Irish dairy and agri-businesses. With €1.5 billion of annual revenue and a 2.4 billion litre milk pool, it will be a large scale, efficient business with a high quality supply chain and the strength and diversity to face the future with confidence. Glanbia plc will continue to focus on its global nutrition strategy through the platforms of Glanbia Performance Nutrition (GPN), Glanbia Nutritionals (GN) and Strategic Joint Ventures for the benefit of all shareholders."

Dairy Ireland

Dairy Ireland is currently a wholly owned segment of Glanbia plc. In 2016 Dairy Ireland delivered revenue of €616.2 million, EBITA of €30.7 million and an EBITA margin of 5.0%. Dairy Ireland, which accounted for 10.1% of Glanbia's wholly owned EBITA in 2016, has two main businesses, Glanbia Consumer Foods Ireland and Glanbia Agribusiness. Glanbia Consumer Foods Ireland is the leading supplier of branded consumer dairy products to the Irish market, as well as an exporter of long-life dairy products. Glanbia Agribusiness supplies inputs to the Irish agriculture sector and is the leading purchaser and processor of grain and the leading manufacturer of branded animal feed in Ireland. Dairy Ireland also has holdings in a number of associates involved in primary manufacture and distribution of farm inputs. All of Dairy Ireland's manufacturing operations are based in the Republic of Ireland.

Proposed Transaction summary

Under the Proposed Transaction Glanbia Co-op will acquire a 60% interest in Dairy Ireland and its related associates. Post the completion of the proposed transaction Glanbia Ingredients Ireland, Glanbia Consumer Foods Ireland and Glanbia Agribusiness will be integrated to form one business, Glanbia Ireland. Dairy Ireland would no longer be a wholly owned segment of Glanbia plc with Glanbia Ireland being an associate investment of Glanbia plc. Should the Proposed Transaction complete, Jim Bergin, who is currently the CEO of Glanbia Ingredients Ireland Limited will be appointed CEO of Glanbia Ireland.

Strategic rationale

· The strategic rationale for the creation of Glanbia Ireland includes:

· Building on the successful partnership between Glanbia Co-op and Glanbia plc since the creation of Glanbia Ingredients Ireland in 2012;

· Integration of three strong, well invested Irish based businesses to create value for all stakeholders;

· As Ireland's largest milk processor, maximising the opportunities that will be created by the expected continued growth in milk supply in the Irish supply base of Glanbia Ireland; and

· Creating a single platform for strategic investment. There are currently plans for a strategic investment programme in Glanbia Ireland of between €250 million to €300 million in the period between 2017 and 2020. This investment programme will increase capacity to support the stated growth ambitions of the Glanbia milk suppliers and optimise value adding opportunities. The financing of the investment will largely be sourced from dedicated bank facilities in Glanbia Ireland.

Key terms of the Memorandum of Understanding

The key terms of the non- binding memorandum of understanding (MOU) announced today are as follows:

· At completion Glanbia Co-op will pay Glanbia plc €112 million for a 60% equity interest in Dairy Ireland;

· Glanbia Ireland will acquire 100% of the working capital in Dairy Ireland at completion financed by banking facilities ;

· Average 3 year working capital in Dairy Ireland from 2014 to 2016 was approximately €92.5 million;

· Final consideration will be dependent on the value of actual working capital at completion;

· The Pension obligations associated with the Dairy Ireland businesses are included in the Proposed Transaction. On an IAS 19 basis these obligations amounted to approximately €60 million at financial year end 2016;

· The new Glanbia Ireland organisation will, from 2018, have a minimum annual profit retention policy of a profit after tax of 3.2% of net revenues which will increase over time dependent on future value adding investments. In addition the first €5 million generated in any one year above the minimum profit target will be set aside in a volatility fund with the timing and nature of payments from the fund at the discretion of the board of Glanbia Ireland. Glanbia Ireland will have an annual target dividend pay-out ratio of 50% of profit after tax.

Process, approvals and timing

· It is expected that binding legal agreements and the appropriate approvals relating to the Proposed Transaction will be completed by the parties by mid-2017;

· Glanbia Co-op plans to hold a vote of its members to approve the Proposed Transaction with a requirement for a simple majority of votes cast of eligible Co-op members present;

· The Co-op will finance the Proposed Transaction with the sale of shares it owns in Glanbia plc and existing resources;

· Glanbia Co-op will also hold a separate vote on related proposals which will require not less than a two thirds majority vote of eligible Co-op members present. These related proposals are;

o The sale of up to 3% of the issued share capital in Glanbia plc to finance the Proposed Transaction and part finance a proposed Member Support Fund;

o The spin out of 2% of the issued shares of Glanbia plc currently held by Glanbia Co-op directly to its members on a pro rata basis based upon their individual holdings in the Co-op.;

o A rule change allowing the Board of Glanbia Co-op the discretion to further reduce the Co-op's shareholding in Glanbia plc to 28%, as well as requiring further member approval for any future proposal to reduce the Co-op's shareholding in Glanbia plc below 28%.

· The resolution to create a €40 million Members' Support Fund, which is linked to all of the above proposals, requires the approval of eligible members present by a simple majority.

· If all of the proposals above are approved there will be a further reduction of Glanbia Co-op's representation on the Glanbia plc Board by one Director in 2022 taking the Co-op's total representation on the Glanbia plc Board to 6 Directors in 2022;

· Today Glanbia Co-op holds approximately 36.5% of the issued shares in Glanbia plc. If all of the proposals above are approved and executed in full the Co-op would own approximately 31.5% of the issued share capital in Glanbia plc;

· In addition, as the joint venture transaction is between related parties it will require the approval of Glanbia shareholders at a general meeting, excluding the Society and its associates.

· Subject to completion of legal contracts and receipt of all necessary approvals, expected completion date is mid-2017.

Valuation summary Dairy Ireland

Note final consideration will be the sum of the total value of the 60% equity interest in Dairy Ireland plus the value of 100% of the working capital in Dairy Ireland at completion.

Use of proceeds

If the Proposed Transaction completes, all consideration will be settled in full with cash and Glanbia plc intends to initially use the proceeds from the sale to pay down existing debt.

Further updates

If and when final binding legal agreements relating to the Proposed Transaction are signed, Circulars relating to the Proposed Transaction will be published and sent to the Shareholders of Glanbia plc and Glanbia Co-op. These documents will contain the details of the key terms agreed between Glanbia plc and the Glanbia Co-op and provide notice of the EGM. Note final terms may vary to those outlined in this announcement.

Advisors

Advisors to Glanbia PLC : Corporate finance advisor: IBI Corporate Finance, Sponsor: Davy Corporate Finance and legal advisor: Arthur Cox

Advisors to the Society: Corporate finance: EY and legal advisor: William Fry

ENDS

For further information contact

Glanbia plc +353 56 777 2200

About Glanbia plc

Glanbia plc is a global nutrition company, grounded in nature and science dedicated to providing better nutrition for every step of life's journey.

Glanbia has deep roots in the dairy industry and has become the world's leading producer and marketer of quality performance nutrition products supporting active lifestyles. Its success as a global ingredients provider has been built on Glanbia's expertise in nutritional solutions supported by significant investment in research and development.

With total group turnover of almost €3.7 billion per annum in 2016, over 6,000 employees and a presence in over 32 countries worldwide, Glanbia's vision is to be one of the world's top performing nutrition companies, trusted to enrich lives every day.

About Glanbia Co-operative Society Limited

Glanbia Co-operative Society Limited is Ireland's largest and most valuable Co-operative, with 14,773 members. Glanbia Co-op is the largest individual shareholder in Glanbia plc, today holding approximately 36.5% of the issued share capital of Glanbia plc.

Glanbia Ingredients Ireland (GII)

Glanbia Ingredients Ireland is a 60:40 joint venture between Glanbia Co-operative Society Limited and Glanbia plc. It is the largest dairy processor in Ireland, processing a total of 2.2 billion litres of milk per year with approximately 700 employees and sales revenue of over €836 million in 2016. Its products, the large majority of which are exported to more than 60 countries, include milk powders, butter, cheese, whey protein, milk protein and casein. Its customers include many of the large global food and infant formula manufacturers as well as more regionally focused players across Europe, Middle East, Africa and Asia.