GLANBIA should sell its European joint venture cheese operations and spin off its performance nutrition business and list it on the stock markets in the United States and Ireland, according to an activist investor that’s pushing for major change at the group.
Clearway Capital insists the moves would unlock significant value in the group and would effectively double the total valuation to more than €6bn.
In a letter to Glanbia chairman Donard Gaynor, Clearway Capital founder and CEO Gianluca Ferrari said that the Irish group’s Glanbia Performance Nutrition unit has “lost touch with its consumer base”.
Clearway has taken a less than 3pc stake in Glanbia, whose shares are currently trading at €11.10, giving it a €3.07bn market capitalisation.
“We believe that Glanbia Plc should be trading at over €21.08 per share, but the market continuously prices the company at a substantial discount to its fair value – and for good reason,” Mr Ferrari insisted in the letter made public today and which was sent to the Glanbia chairman last month
“Execution in Glanbia Performance Nutrition has been sub-optimal,” Mr Ferrari claimed. “Frequent profit warnings combined with a confusing corporate structure and questionable capital allocation complicate the equity story and overarching sustainability concerns pose significant challenges to the company’s long-term viability.”
Glanbia’s Performance Nutrition (GPN) division owns products such as Optimum Nutrition, SlimFast and Amazing Grass. The division generated €1.3bn of Glanbia’s total €4.2bn revenue last year.
Mr Ferrari also claimed in his letter that hiving off the GPN unit into a standalone business listed in the US, with a secondary listing in Ireland, would help to unlock more than €10.88 in additional value per share.
He has also insisted the move, combined with a streamlining of Glanbia’s European cheese joint ventures, would put the group in a position “to deliver long-term value for its shareholders by allowing each single business to focus on addressing the challenges that are currently facing.”
Glanbia’s other main division is its Nutritionals segment, which last year generated sales of €2.9bn.
Clearway Capital has also told Glanbia that it believes the SlimFast brand, which the group acquired in 2018 for $350m, “is at risk of permanent impairment” due to “recent developments”.
SlimFast consumption in North America in the 52 weeks to 26 December 2021 declined by 4.3pc, with Glanbia blaming headwinds in the diet category.
Clearway has told Glanbia, whose chief executive is Siobhan Talbot, that it believes SlimFast’s performance is indicative of a “much broader and worrisome issue”.
“The diet category no longer reflects today’s customer preferences, and the brand has failed to evolve its messaging and product portfolio accordingly,” it said. “We believe that the company must work to shift SlimFast’s brand messaging and product portfolio away from dieting and towards a healthy lifestyle.
In his letter, Mr Ferrari claimed that Glanbia’s Optimum Nutrition brands has underperformed due to “a general lack of customer engagement, missed opportunities in the ready to drink market, poor execution on direct-to-consumer sales, the lack of incorporation of sustainability into brand messaging and other shortcomings”.
He also said that the economic characteristics of Glanbia’s Nutritional Solutions segment make it a “hidden gem” within the group’s “complex structure” that the market “clearly does not appreciate”.
As a separate business, Clearway insists that division would benefit and “conservatively trade at a market capitalisation of at least €2.5bn, or €9.00 a share”.
Glanbia said in a statement today that it is “committed to acting in the best interests of the company and all shareholders and stakeholders and regularly reviews its strategic priorities and opportunities to achieve its objectives and drive shareholder value”.
“We welcome open communications with all our shareholders and have been engaged with representatives of Clearway,” it added.
“Glanbia has a clear strategy addressing key consumer health and wellness trends as a global, sustainable, purpose led nutrition business,” the group noted in a statement. “The business performed strongly in 2021, plans further growth in 2022 and is well positioned to deliver on its strategic growth agenda.”
Glanbia will publish a quarter-one update tomorrow.