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Deals of the Year 2023: Innovative combination of exchangeable bonds and equity placement helps unlock potential for Glanbia Co-op    
A combined offering of exchangeable bonds and a private placement of shares by Glanbia Co-op was the first corporate equity-linked transaction of 2022. This innovative approach to funding the €307m acquisition of a 40 per cent stake in Glanbia Ireland, the largest dairy processor in Ireland, was pivotal to returning control of the dairy processing assets and related consumer brands to the Co-op.
In January 2022, Glanbia Co-operative Society returned to the equity-linked market with a combined offering that included a €250 million Exchangeable Bond into Glanbia plc and concurrent sale of Glanbia plc shares. The 5-year Exchangeable Bond had a coupon of 1.875 per cent with a 35 per cent exchange premium. The equity placement consisted of a c. €70 million private placing of Glanbia Plc shares (equal to approximately 2 per cent of Glanbia plc’s issued share capital) by the Co-op and a c. €39 million concurrent delta placement.

This was the first corporate equity-linked transaction of 2022 and the second Exchangeable Bond by Glanbia Co-op, following on from its debut €100 million Exchangeable Bond in 2016. Proceeds of the transaction were used by the Co-op to fund the €307 million acquisition of the remaining 40 per cent stake of Glanbia Ireland DAC (renamed Tirlan Co-operative Society Ltd in September 2022) from Glanbia Plc.
Joe Gill, Head of Origination, Goodbody.

The combination of placing equity shares and exchangeable bonds was an innovative approach to funding the €307m acquisition of a 40 per cent stake in Glanbia Ireland, the largest dairy processor in Ireland.

The Bonds were issued at a challenging time in the market, with rising inflation negatively affecting funding availability. However, reflecting the quality of the deal, there was strong demand for the bonds, aided by the equity-linked element supporting the overall credit-case for investment. The €70 million placing of Glanbia Plc shares was completed via an Accelerated Book Build.

The Bonds bear interest at a fixed rate of 1.875 per cent per annum, payable semi-annually in arrears on 27 January and 27 July of each year and are exchangeable for existing shares in Glanbia plc owned by the issuer. Upon delivery of an exchange notice by a bondholder, the issuer may elect to pay a cash alternative amount instead of delivering all or some of the relevant pro rata share of the exchange property. The initial exchange price of the Bonds was set at a premium of 35 per cent to the placement price of the shares sold by the issuer in the concurrent equity placement.

The Bonds constitute direct, unconditional, unsubordinated obligations of the issuer and benefit from an Irish law fixed charge over the exchange property, which initially comprises just over 15.1 million shares in Glanbia plc.
Billy Quinlan, Head of Global Banking Ireland, BNP Paribas.

The Glanbia plc shares were originally issued in share certificates. However, the share custodian, BNY Mellon, required them to be represented in book-entry form. To achieve this legal adviser Matheson worked with Glanbia Co-Op and Goodbody Stockbrokers to arrange for the shares to be ‘dematerialised’ by clearing them through the new Irish Central Securities Depositary set up by Euroclear Bank SA/NV in 2020 (to allow Irish share clearing to be transferred from CREST as a consequence of Brexit) and then made subject to the security interest in favour of the Bondholders. This was a novel process as the parties had not previously worked to dematerialise existing certificated shares.

This dematerialisation and security interest was a key element of the transaction, as the equity-linked and secured nature of the Bonds reduced the interest rate applicable and was a significant aspect in ensuring the transaction was economically advantageous for the client. The Bonds are admitted to trading on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange.

Billy Quinlan, Head of Global Banking Ireland, BNP Paribas said, “BNP Paribas as the long term leading bank in Equity Linked capital markets was proud to accompany Glanbia Co-Op on its second foray into this market raising €250m of bonds exchangeable into Glanbia plc. This transaction was fundamental in the acquisition by Glanbia Co-Op of the dairy business of Glanbia plc to create Tirlan.”
Joe Gill, Head of Origination, Goodbody said, “Goodbody’s long-established research coverage of the food sector, its international investor reach, and its ability to support both equity and bond offerings, were important factors in our ability to offer Glanbia a comprehensive capital markets solution in the restructuring of ownership of its dairy processing business.”

David Fitzgibbon, Partner at Matheson, which was Irish counsel to the Issuer, said: ‘This transaction was a pivotal part of the transaction to form Tirlan and to effect the takeover of Glanbia Plc’s interest in Glanbia Ireland, thus returning control of the dairy processing assets and related consumer brands to the Co-op. It was one of the few exchangeable bonds issued in the first half of 2022 and is a testament to the planning of the Society.

Matheson’s Finance and Capital Markets team on the transaction was led by partners Richard Kelly and Donal O’Donovan and the Corporate team was led by partner David Fitzgibbon and senior associate Enda Garvey.

Other advisors included: Herbert Smith Freehills (English counsel to the Issuer); Clifford Chance LLP (English counsel to the dealers); Goodbody Stockbrokers (Joint Global Co-Ordinator of equity placing, Co-Manager of the bond issue); BNP Paribas (Joint Global Coordinator and Joint Bookrunner); HSBC (Joint Global Coordinators and Joint Bookrunner); Rabobank (Joint Bookrunner). PwC provided tax advice and execution support.

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