Fresh Milk Producers chairman believes Glanbia should become a co-op, writes Colm Keena

As far as Eamonn Bray is concerned, the expansion and growth of Glanbia plc is not likely to be a good thing for Irish dairy farmers. Even worse would be, what is to his mind a likely alternative, the taking over of Glanbia by a multinational such as Nestlé, which would feel no allegiance towards Irish farmers and would have an abiding interest in sourcing the cheapest milk.

It is for these reasons that Mr Bray, the chairman of the Fresh Milk Producers' group, believes the successful Irish food plc should be changed back into a farmers' co-op, albeit one with highly paid executive directors and ambitions towards conquering international markets.

In June, he and his colleagues in the Fresh Milk Producers group made a presentation to the Glanbia board along these lines, arguing the case for the privatisation of the food company.

After considering the matter, the board informed the producers group that it was against such a move.

"We believe the board took a hasty decision and didn't look at the long-term interests of the company and the farmers," says Mr Bray. "People think this is turning back the clock, but it's not. The view is out there that it is not going to happen but I am of the view that it is going to happen."

He is convinced that farmers will see the wisdom of what he and his colleagues are proposing. This in turn will lead to the farmer directors on the Glanbia board using their majority position to vote in favour of the producers' suggestion.

The structure of Glanbia, which has a turnover of more than €2 billion, reflects its origins. It is the product of the merger of the Avonmore and Waterford groups, which were themselves plcs and former farmers' co-operatives.

Only 44.2 per cent of Glanbia is owned by private investors, with the remaining 55.8 per cent being owned by farmers by way of Glanbia Co-operative Society. Of the 20 seats on the plc board, 14 are held by farmers. These farmers form the board of the co-op. They are elected by a council, which in turn represents the various shareholder districts of the co-op.

It is this structure and the power it gives farmers that Mr Bray feels may hold the key to realising his group's plan.

Glanbia is not the largest food company in the State but it is the largest dairy company. Its milk division is involved in liquid milk, the production of dairy products such as cheese and yoghurt, the sale of milk to alcohol companies (for Irish cream liqueurs) and the production of skimmed milk powder and butter.

The farmers represented by Mr Bray are full-time dairy farmers who produce milk 365 days a year. They supply all of the liquid milk that Glanbia sells in cartons and plastic bottles. Overall, they make up about one-third of the State's dairy farmers.

From their point of view, the best focus Glanbia could adopt would be developing outlets for Irish-produced milk and ensuring as much money as possible can find its way to the milk producers without hampering Glanbia's success at generating and maintaining sales.

Mr Bray sees a tension between these objectives and those of Glanbia plc, which he says wants to produce the maximum level of profits possible and increase shareholder value.

He points to Glanbia's plans for expansion into food production outside the State - activities which, he says, do little or nothing for Irish dairy farmers. Better to spend the money that would be spent on expansion abroad on the production of new Glanbia products and the increased marketing of Irish-produced dairy products in new markets such as Asia, he argues

His vision of a private Glanbia run by farmers does not resemble any particular model to be found in other jurisdictions. Rather, he says, the model being advocated by the group he belongs to is a mix of the best elements of co-ops he is aware of both here and abroad. The organisation he sees would have executives and directors who were being paid top rates.

With a board of approximately 14, it could have a number of non-farming directors, people who, for instance, came from the food industry.

"But the real power would still have to be in the farmers' hands. The farmers have the brains to do it but they need to be skilled up," according to Mr Bray.

When he and his group set out about a year ago to look at the best way forward for Glanbia, he says they had no particular outcome in mind. They hired consultants, talked to people, explored a variety of ideas. The one factor that became obvious, he says, was that the farmers needed more control of Glanbia. A proposal was drafted and put to an international bank. The proposal, essentially, was that the bank would fund the project if the Glanbia board was agreeable to it. The first bank approached agreed.

The next step was the presentation to the Glanbia board, which happened on June 26th. When the board subsequently turned the suggestion down, Mr Bray and his colleagues decided to go public to encourage debate.

"The grassroots shareholders should have the opportunity to make the decision," he says. "Farmers will see in time that the best road is to take back ownership."

It will come down to "pure lobbying", he says. No one wants to force the issue. "We'd prefer to bring people along with us. If we split ourselves on this now, no one will be a winner."

The method for taking the company private involves increasing its debt and paying shareholders a premium above the share price of the day. Mr Bray suggests a 20 per cent bonus. The group's figures "stack up to a particular share price", he says, but adds that if the plan is to proceed, the board can decide on the timing.

Mr Bray says the dividends currently being paid by the company would service a loan of €200 million. Loans are less an issue for private companies than they are for plcs, he says. Restructuring existing borrowing, by extending the period, would free up fresh opportunities for taking on more debt. He says Glanbia's R&D and product development spend should be left alone during this process. Also, there would be no acquisitions or disposals.

He says it has been suggested they will be "swapping one set of suits for another" - the needs of a plc for the needs of bankers.

His answer to this, however, is that no dividends would be paid in the early years and, once the level of debt was paid down, the farmers would, in effect, own the co-op and be fully in charge.

In time, he says, the State should have one large co-op buying milk from those dairy farmers still in operation and producing products for sale on the international markets.

He points out that, in 1983, when the EU's milk quotas were set, there were 70,000 dairy farmers in the State. There are now about 25,000. In 1983 there were 35 processors but now there are "four serious ones" out of a total of 13. In the next 10 years, the number of dairy farmers will drop by half and the scale of the individual dairy farm will have to grow, he says.

Mr Bray farms 100 acres in Delvin, Co Westmeath, where he keeps 65-70 cows. His family has been farming for five generations and he has been a farmer since he left school. His eldest son, Kenneth, who has just completed the Leaving Certificate, will go to university before he decides if he is to take on farming for a living.