When Tirlán announced that the co-op was proceeding with the spinout of 15 million Glanbia shares to members, there were some interesting details in the illustrative examples produced by the co-op.
The information published on 12 May which accompanied the announcement showed that for every 1,000 Tirlán shares members held, 107 would be cancelled as part of the transaction. Every Tirlán member would be left with 893 shares in Tirlán and be given 448 shares in Glanbia once the spinout is completed.
Back in September last year when the proposal was first put to members, a similar information package was published. At that time, members would see 138 Tirlán shares cancelled for every 1,000 shares held.
The value of Glanbia shares used in the September calculation was €15.90. The value of Glanbia shares used in the example earlier this month was €11.51, reflecting the drop in Glanbia shares in the intervening period.
That drop is also reflected in the smaller number of Tirlán shares members will lose as part of the spinout, as while Tirlán is giving up the same number of shares, the value of the spinout has dropped, meaning it accounts for a smaller amount of the overall value of the co-op.
Calculating potential value
The interesting thing is that we can use the spinout illustrations to calculate how much Tirlán values itself at without its Glanbia stake. A member’s share in the co-op is an ownership stake in both the Glanbia holding and the processing business.
Looking at the illustrations produced by the co-op we can see that 15m shares in Glanbia were worth 13.8% of Tirlán in September (138 of every 1,000 shares) and those same 15m Glanbia shares were worth 10.7% of Tirlán (107 of every 1,000 shares) earlier this month.
Because we know the value of those shares used in those calculations, we can also then work out how much Tirlán itself was worth on both dates, according to the illustrative examples.
In September, 15m Glanbia shares at €15.90 were valued at €238.5m. As we have shown, that was 13.8% of Tirlán, so some quick maths tells us the total value of Tirlán was €1.73bn at that time.
In recent weeks, the value of the 15m shares, at €11.51 each, had dropped to €172.6m. That accounted for 10.7% of the value of Tirlán, putting the total value of the processer at €1.61bn.
Now, as we know the value of the shares at both times, and the total number of shares Tirlán held, we can also work out the value Tirlán places on its operation excluding its holding in Glanbia.
In September, 75.5m shares were worth €1.2bn, while earlier this month they were valued at €869m. To get a net value of those shares, we should take away the outstanding amount of the 2027 bond backed by Tirlán shares, at €250m, which leaves the value at €950m in September and €619m in May.
Then taking those figures away from the total value calculated above, we see that in the illustrative example given in September that Tirlán, ex-Glanbia was worth €1.73bn minus €950m which equals €780m.
The same calculation for May gave a processor worth €991m. That is a jump of €211m in the valuation of the co-op between the September illustration and the one produced in recent weeks.
The Irish Farmers Journal asked Tirlán for an explanation of this sizeable difference in the two valuations. A spokesperson for the co-op said the September valuation “was an illustrative example with an assumed value in line with the previous spin-out” and explained that “in line with the requirements set out in legislation, an updated valuation was carried out in recent weeks by an external valuation expert in advance of the spin-out actually issuing. It takes into account a multiple of factors, including the performance of the operating business, peer multiples and debt levels, which have all changed since the last valuation.”
Peer multiples
One of the interesting things in explanation from Tirlán is that “peer multiples” was a factor in the calculations. The phrase peer multiples means the valuation was influenced by how much other companies in the industry (peers) were valued as a multiple of its earnings.
The obvious recent peer example here is Kerry Dairy Ireland, which was valued at €500m, 9.4 times its 2023 earnings before interest tax, depreciation and amortisation (EBITDA).
Taking that, possibly generous, 9.4 times multiple and Tirlán’s 2024 EBIDTA of €118.5m, we get a figure of €1.114bn for Tirlán. Subtracting the co-op’s net debt figure at the end of 2024 of €138m, leaves a valuation of €978m, a number very close to the €991m we calculated from the illustrative example given by Tirlán itself earlier this month.
We can’t say for certain that this is how the new Tirlán valuation was calculated, or even exactly what the new Tirlán valuation is as the processor said they could not share that information with the Irish Farmers Journal for commercial reasons.
Comment
Whenever a field or a house is being sold, the first thing an auctioneer will look at is what other properties in the area have been making before they come to a valuation.
The same thing happens in business, where a company is valued based on peer multiples – the price of companies in the same industry, rather than necessarily in the same geographic area.
For co-ops in Ireland, the sale of Kerry Dairy Ireland to Kerry Co-op has given the entire industry a new benchmark for those valuations. In the short term, it has worked out rather well for Tirlán members who have to give up fewer of their co-op shares as part of the Glanbia spinout.
However, it could prove to be a stumbling block if the industry is facing into a period of consolidation – as every dairy CEO seems to be predicting these days.
If negotiations are entered where one side has higher earnings, then it may seek a larger stake in whatever entity emerges from talks.
It may even incentivise co-ops to target higher annual earnings rather than target maximising farmer returns in order to be in a better position in any future merger talks; something that would be a long way from the co-op ethos.
For farmers, the main measure of the value of a co-op should always be how efficient that processor is at turning milk or grain into money for the farmer.
A co-op that is valued at €1bn but pays a price well below the best processors is worth an awful lot less to a farmer than one which is valued at €100m but consistently pays a high price.
In short
Value of Tirlán core business jumps by over €200m.Co-op says valuation exercise carried out by external experts.Sale of Kerry Dairy Ireland sets benchmark for co-op valuations. Co-op valuations have potential to cause difficulty in any merger talks.
When Tirlán announced that the co-op was proceeding with the spinout of 15 million Glanbia shares to members, there were some interesting details in the illustrative examples produced by the co-op.
The information published on 12 May which accompanied the announcement showed that for every 1,000 Tirlán shares members held, 107 would be cancelled as part of the transaction. Every Tirlán member would be left with 893 shares in Tirlán and be given 448 shares in Glanbia once the spinout is completed.
Back in September last year when the proposal was first put to members, a similar information package was published. At that time, members would see 138 Tirlán shares cancelled for every 1,000 shares held.
The value of Glanbia shares used in the September calculation was €15.90. The value of Glanbia shares used in the example earlier this month was €11.51, reflecting the drop in Glanbia shares in the intervening period.
That drop is also reflected in the smaller number of Tirlán shares members will lose as part of the spinout, as while Tirlán is giving up the same number of shares, the value of the spinout has dropped, meaning it accounts for a smaller amount of the overall value of the co-op.
Calculating potential value
The interesting thing is that we can use the spinout illustrations to calculate how much Tirlán values itself at without its Glanbia stake. A member’s share in the co-op is an ownership stake in both the Glanbia holding and the processing business.
Looking at the illustrations produced by the co-op we can see that 15m shares in Glanbia were worth 13.8% of Tirlán in September (138 of every 1,000 shares) and those same 15m Glanbia shares were worth 10.7% of Tirlán (107 of every 1,000 shares) earlier this month.
Because we know the value of those shares used in those calculations, we can also then work out how much Tirlán itself was worth on both dates, according to the illustrative examples.
In September, 15m Glanbia shares at €15.90 were valued at €238.5m. As we have shown, that was 13.8% of Tirlán, so some quick maths tells us the total value of Tirlán was €1.73bn at that time.
In recent weeks, the value of the 15m shares, at €11.51 each, had dropped to €172.6m. That accounted for 10.7% of the value of Tirlán, putting the total value of the processer at €1.61bn.
Now, as we know the value of the shares at both times, and the total number of shares Tirlán held, we can also work out the value Tirlán places on its operation excluding its holding in Glanbia.
In September, 75.5m shares were worth €1.2bn, while earlier this month they were valued at €869m. To get a net value of those shares, we should take away the outstanding amount of the 2027 bond backed by Tirlán shares, at €250m, which leaves the value at €950m in September and €619m in May.
Then taking those figures away from the total value calculated above, we see that in the illustrative example given in September that Tirlán, ex-Glanbia was worth €1.73bn minus €950m which equals €780m.
The same calculation for May gave a processor worth €991m. That is a jump of €211m in the valuation of the co-op between the September illustration and the one produced in recent weeks.
The Irish Farmers Journal asked Tirlán for an explanation of this sizeable difference in the two valuations. A spokesperson for the co-op said the September valuation “was an illustrative example with an assumed value in line with the previous spin-out” and explained that “in line with the requirements set out in legislation, an updated valuation was carried out in recent weeks by an external valuation expert in advance of the spin-out actually issuing. It takes into account a multiple of factors, including the performance of the operating business, peer multiples and debt levels, which have all changed since the last valuation.”
Peer multiples
One of the interesting things in explanation from Tirlán is that “peer multiples” was a factor in the calculations. The phrase peer multiples means the valuation was influenced by how much other companies in the industry (peers) were valued as a multiple of its earnings.
The obvious recent peer example here is Kerry Dairy Ireland, which was valued at €500m, 9.4 times its 2023 earnings before interest tax, depreciation and amortisation (EBITDA).
Taking that, possibly generous, 9.4 times multiple and Tirlán’s 2024 EBIDTA of €118.5m, we get a figure of €1.114bn for Tirlán. Subtracting the co-op’s net debt figure at the end of 2024 of €138m, leaves a valuation of €978m, a number very close to the €991m we calculated from the illustrative example given by Tirlán itself earlier this month.
We can’t say for certain that this is how the new Tirlán valuation was calculated, or even exactly what the new Tirlán valuation is as the processor said they could not share that information with the Irish Farmers Journal for commercial reasons.
Comment
Whenever a field or a house is being sold, the first thing an auctioneer will look at is what other properties in the area have been making before they come to a valuation.
The same thing happens in business, where a company is valued based on peer multiples – the price of companies in the same industry, rather than necessarily in the same geographic area.
For co-ops in Ireland, the sale of Kerry Dairy Ireland to Kerry Co-op has given the entire industry a new benchmark for those valuations. In the short term, it has worked out rather well for Tirlán members who have to give up fewer of their co-op shares as part of the Glanbia spinout.
However, it could prove to be a stumbling block if the industry is facing into a period of consolidation – as every dairy CEO seems to be predicting these days.
If negotiations are entered where one side has higher earnings, then it may seek a larger stake in whatever entity emerges from talks.
It may even incentivise co-ops to target higher annual earnings rather than target maximising farmer returns in order to be in a better position in any future merger talks; something that would be a long way from the co-op ethos.
For farmers, the main measure of the value of a co-op should always be how efficient that processor is at turning milk or grain into money for the farmer.
A co-op that is valued at €1bn but pays a price well below the best processors is worth an awful lot less to a farmer than one which is valued at €100m but consistently pays a high price.
In short
Value of Tirlán core business jumps by over €200m.Co-op says valuation exercise carried out by external experts.Sale of Kerry Dairy Ireland sets benchmark for co-op valuations. Co-op valuations have potential to cause difficulty in any merger talks. 
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