Greencore's dividend plan opposed by top shareholder

One of Greencore’s biggest shareholders has come out against part of the company’s €1bn plan to sell its US business.

Polaris Capital, a 9pc shareholder, is against a plan to return the proceeds of the sale to shareholders as a special dividend. That will result in higher taxes for shareholders, Polaris said. The money should fund a share buyback instead, it added.

Public criticism of the impact of the sale on shareholders will be a blow to Greencore CEO Patrick Coveney.

Polaris said: “The payment of a special dividend will cause a material taxable event for shareholders. This taxable event … will apply to most shareholders.”

“US shareholders who experience withholding tax, whether taxable or tax-exempt entities, will in most cases not be entitled or able to recover the withholding taxes nor avoid taxes on the distribution.

“In the case of individual shareholders, many will experience taxation at high marginal tax rates in other jurisdictions.”

Another issue Polaris has dates back to Greencore’s acquisition of Peacock Foods in the US. Greencore issued new shares to fund that deal – diluting earnings per share.

Greencore hoped this would be cancelled out by the new earnings brought in from Peacock. Under the new Greencore plan the dilutive effect remains, Polaris said, without the US earnings. A share buyback now would reduce the shares in issue and boost earnings per share.

Polaris said it was “indifferent” to the US proposal, but would vote in favour of it while rejecting other resolutions relating to the form of the transaction and the special dividend. Later in a revised statement it said that following discussions with Greencore management, it would only reject one resolution.

“Some investors agitate for changes in corporate structure… often our analysis of such changes does not support the conclusion that such structural changes are in the best financial interests of shareholders in the short or long-term,” Polaris said.

“We have decided to publicly announce our views in this instance to assist the advisers and other shareholders in their advice, analysis, and voting decisions. We also emphasise our strong relationship with Greencore management and the mutual respect we have for each other.”

Greencore said the sale “has received strong support from its institutional investors to-date”.

“The company continues to engage closely with shareholders in order to address any questions,” it added.

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