Inside the world of business

Boardroom drama at UTV

What is going on at UTV? The boardroom row on Thursday that led to chairman John McGuckian and non-executive directors Shane Reihill and Kevin Lagan resigning their roles came as a bolt from the blue. Such a public boardroom divide is rare in plc land in Ireland.

McGuckian jumped before he was pushed after it was made clear by the other board members, mainly the three executive directors, that he would be removed from his role. Chairmen can be sacked from that post by the board although not as non-executive directors. Only shareholders can remove directors. Unusually for a public company here, the executives held three of the eight positions on the board, which is a large proportion.

This rupture of the UTV board is all the more seismic given that McGuckian controls 8 per cent of the business and had been on the board of the Belfast-based media company since 1970. McGuckian also happens to be a board member and minor shareholder of TVC, which owns 18 per cent of UTV. Reihill was TVC’s representative on the board of UTV.

All that UTV would say is the other board members became concerned about Mr McGuckian’s independence as chairman given his involvement with TVC.

The chairman is supposed to act in the best interests of all shareholders at all times. But McGuckian has been a board member of TVC since 2007. Why is it suddenly an issue now when it wasn’t before?

Both sides have accused the other of breaches of the UK’s corporate governance code, without giving specifics.

Clearly, there is a deeper, underlying issue that has led to McGuckian being dumped overboard. Suggestions that TVC and/or McGuckian were shaping up to exercise more control at UTV or even make a bid for the company don’t appear to hold water.

What happens next is not clear but it is probably safe to assume that McGuckian and TVC – given their substantial shareholdings – won’t just let the matter lie.

Stay tuned.

Dual personality makes Glanbia's future unclear

Changes at Glanbia will come into the spotlight in the coming months, as the plc prepares for the abolition of milk quotas in 2015.

The company, which is 54 per cent owned by Glanbia co-op, has indicated that it is planning a major investment on the processing side, believed to be a new plant, in a bid to deal with increased milk production in 2015.

Speculation so far has centred around a tie-up with Dairygold co-op, with initial discussions having taken place between the two groups, though any arrangement is far from a done deal.

While the dairy industry is united in the belief that investment in processing is essential, the major issue of contention is how to fund such expansion, which could cost up to €100 million. Key is how much the plc is prepared to invest in milk processing.

The company’s 2011 results next week are expected to show continued growth in the lucrative nutritionals business, which has become an increasing focus for the business.

The question of whether farmer co-op members should finance the project is also tricky, raising the prospect of current shareholders paying now for an investment that future suppliers will benefit from.

One possibility is that the co-op could sell off some of its holdings in the company – even selling-off some of the co-op stocks would net a hefty sum, and would mean that the shareholder holding may not have to fall below 50 per cent.

But the question of how the company moves forward illustrates the paradox that is at the heart of Glanbia, a company which is bound to two masters – one, a corporate plc, the other, its co-op milk suppliers and shareholders.

One solution which will inevitably be proffered is a splitting of the company, originally proposed two years ago.

The processing issue may give renewed impetus to the proposal, which was narrowly defeated first time round.

As the debate about the best possible path for Glanbia plc gains momentum, one thing for certain is that the plc will have to take into account the views of its co-op members, the majority shareholders. Despite the phenomenal success of Glanbia over the last few years, its unique ownership structure may be critical when it comes to deciding the future of the plc.

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