Polaris, which has an approximate 9% stake in the company, believes that the plan to return the proceeds of the shares back to its shareholders will introduce some tax issues for the recipients.
Rather than the sale, it recommended a share buyback.
Tax Fears On Diluted Earnings
“The payment of a special dividend will cause a material taxable event for shareholders. This taxable event, beyond a normal course dividend, will apply to most shareholders,” Polaris said.
“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.”
It also highlighted Greencore’s recent acquisition of Peakcock Foods in the US, as the Irish group issued new shares to fund the purchase, which resulted in a dilutive impact on earnings per share.
It is concerned that the diluted effect from the deal will remain in place without the earnings from the unit to counteract it.
The group said that it decided to go public with its views to “assist the advisors 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,” the company said.
Despite the announcement of the sale of its entire US operation, and the subsequent fall in its shares, Greencore CEO Patrick Coveney has said he has no intention of quitting the food group.
© 2018 Checkout – your source for the latest Irish retail news. Article by Aidan O’Sullivan. Click subscribe to sign up for the Checkout print edition.