This is a very important piece of legislation, the purpose of which is to enable Siúicre Éireann c.p.t. to be partially privatised. I am satisfied that this is the only way that the company can expand and develop commercially. At the same time, the proposed legislation provides that the restructuring will be carried out in such a way that it will safeguard the continued existence of the Irish sugar industry, that the Exchequer will receive a satisfactory return on its investment, and will ensure that beet growers and employees of the company can fully benefit from its growth.
The Bill has been prepared following an in-depth examination of the future of the company. Consultants were appointed by the Government early in 1989 to carry out a detailed study of the company and to report on any restructuring or other developments considered necessary to ensure its long term commercial viability and growth. Following careful consideration of their report, the Government set up a small ad hoc group in September 1989 to examine all the options for the company's future. This group was representative of my Department, the Department of Finance, the Industrial Development Authority and Siúicre Éireann itself. The group examined three options for the future of the company.
Before commenting on these options, I would like to give you some details concerning Siúcre Éireann. The company is, as of now, a public limited company with an issued share cpaital of £66 million comprising 65.5 million ordinary shares of £1 each and 0.5 million 6 per cent cumulative preference shares of £1 each. The Minister for Finance holds all the ordinary shares save a small number of qualifying shares held by directors. The 0.5 million preference shares are held by various investors.
Its main activity, accounting for almost 50 per cent of its turnover, is the processing and distribution of sugar. It has almost 100 per cent of the market for sugar in the State, 70 per cent of the market in Northern Ireland and a small market for industrial sugar in Great Britain. The company is also involved in the food sector and in the recent past has made a number of acquisitions in this area, the most significant of which was a 50 per cent share in Odlums Ltd. with options on the purchase of the remaining 50 per cent. Agri-trading, with 24 per cent of turnover, is the principal other activity of the company, which is also involved in recently commenced joint ventures with private companies, notably in Thurles.
The company has reported net profits on ordinary activities since 1986 and had a record after-tax net profit on ordinary activities of £18.2 million in the year ending 30 September 1990 compared with £15.4 million in 1989. Extraordinary charges of £5.9 million reduced the retained profit in 1990 to £12.3 million. During the period of recovery, profits were applied in reduction of borrowings and large accumulated losses which had been incurred prior to 1986.
Turnover in the year ending September 1990 was £271 million, made up as follows: Sugar Division, £133 million; Food Division, £74 million; Agri-Trading Division, £64 million. The turnover consisted largely of Irish sales with only £46 million accounted for by sales outside the State.
In the year to 30 September 1990 the company employed 1,757 people compared to 1,556 in the previous year. This increase, the first in many years, was essentially as a result of acquisitions during the year. I am happy to report that at the end of 1990, 187 new jobs had been created in the joint venture replacement industries in Thurles and the target of 384 for the end of 1992 is very clearly realisable. I am glad to say, as regards the old Tuam sugar factory site, planning permission has been sought for the building of a 20,000 sq. ft. advance IDA factory which will bring a new industry to the area. The Sugar Company will contribute to the cost of this factory in the context of its commitment to the establishment of new industries in the area of following the closure of the sugar factory there.
The improved results have been achieved as a result of restructuring in the company and by diversification. However, apart from the excellent work of the board, management and staff, a major factor in turning the company around was the significant capital investment by the Exchequer, amounting to £59 million between 1982 and 1987. This brought the total Exchequer equity holding up to £65.5 million. There has been and continues to be a considerable cost to the State arising from the provision and servicing of these funds. No dividend has been paid because of the legal ban on any such payment until accumulated losses have been cleared. In addition, because of protracted loss-making, the company has paid little corporation tax.
Following flotation, the State will at last obtain some return for its investment. This will be achieved both through sale of shares and the payment of dividends on the residual Exchequer shareholding.
I would now like to return to the different options considered by the ad hoc group. The first option was to continue the present activities and structures of the company. On the basis of the company's excellent performance in recent years, it is expected to continue to operate profitably in the medium term. The shareholder could expect a reasonable dividend this year and for some period thereafter. However, this is not really an option as the long term growth and expansion of the company would not be ensured. The need for the company to diversify and expand its base is highlighted by possible future changes in the Community sugar regime, the outcome of the GATT negotiations and the fact that in European terms the company is a moderately-sized player in a market tending to be dominated by the large.
The second option — total privatisation of the company — was not considered as suitable. It could ensure that the Government would realise a short term Exchequer benefit on its investment in Siúicre Éireann. The company would, however, be particularly attractive to other EC companies which would anticipate maximising economies of scale and/or rationalisation. A sale on that basis could have particularly negative effects on employment and on the future of beet growing in Ireland. In addition, there would be no guarantee that any of the profits from future sugar operations would be invested in Ireland.
The restructuring of the company on the basis of partial privatisation and commercial development while retaining a degree of control over its sugar operations and the sugar quota was the final option examined by the group. They chose this option as the best one for the future of the company. They took the view that the company's commercial development should be undertaken largely by means of acquisition and/or joint venture so as to minimise the risk for Siúicre Éireann. However, they recognised that while the development of the company cannot be solely financed from internal resources or by borrowing, the Exchequer should not be required to provide additional equity capital for development purposes. Such equity should be raised by the issue of new shares on the stock market following flotation.
The Government, while recognising that partial privatisation would represent a fundamental change in the status of the company, accepted the group's recommendation. They considered that the conditions which originally existed and justified exclusive State control, no longer apply. Already Siúicre Éireann is in the top flight of agri-business entities operating within the State. I am confident that following partial privatisation, it has the requisite ability to meet the demands of investors and as a result of access to market funding will develop in time into a very substantial food company.
I acknowledge that the employees and the suppliers of raw materials to the company, in particular the beet growers, will be anxious to ascertain if the flotation will have significant implications for them. Neither group has anything to fear. On the contrary, the overall strengthening of the financial base of the company which will ensue can only be to their advantage. Indeed, it is the Government's intention that beet growers and employees will be asked to subscribe for shares in the new holding company and this is, I believe, an imporant development. These groups, as shareholders, will have an active interest in the company and benefit from its development by way of expected dividends and capital appreciation of their holdings.
Concern had been expressed regarding the rights of employees following flotation. The position is that workers' interests are protected under the European Communities (Safeguarding of Employees' Rights on Transfer of Undertaking) Regulations, 1980. However, in order to further re-assure workers on this point the Minister for Agriculture and Food has inserted, by way of amendment on Committee Stage in the Dáil, section 6 in the Sugar Bill, 1990, which underlines the rights of employees. This specifically provides that the rights which employees of Siúicre Éireann, or its subsidiaries, hold before the date on which the Minister for Finance transfers his shares in Siúicre Éireann to the new holding company will continue to be held by them on that transfer date. Provision has also been made to ensure that employees will not suffer any less favourable terms under their pension or superannuation schemes on that transfer date.
In addition, I am pleased to see that a Siúicre Éireann/Union agreement has been drawn up and lodged with the Labour Relations Commission and registered with the Labour Court. This agreement relates, inter alia, to employees' conditions, pay, continuity of employment, recognition of trade unions and continuation of existing procedures. I fully endorse the contents of this agreement which I have no doubt will constitute the major protection for the rights of employees.
I now turn to the particular provisions of the Bill. Section 1 is the standard definitions section and requires no specific comment. Section 2 allows the Minister for Finance to exchange his shares in Siúicre Éireann for shares in the new holding company, which will be called "Greencore plc". It also enables the Minister for Finance to acquire further shares in the holding company with the required funds being advanced from the Central Fund. He may also, following consultation with the Minister for Agriculture and Food sell or dispose of shares in the holding company as he sees fit. Funds received in respect of share sales and dividends must be paid into or disposed of for the benefit of the Exchequer.
This section also allows the Minister for Agriculture and Food to acquire a special share, which he may not dispose of, in the holding company. This share is analogous to the "Golden Share" issued in privatisations in other European countries in recent years, notably in the UK and France. The purpose of the special share is to ensure that the State can effectively exercise certain specified control over the sugar operations of the company while reducing its own shareholding below 50 per cent.
The special share is designed principally to ensure that none of the following events can arise without the prior consent in writing of the special shareholder: any change in certain specified articles in the articles of association of the company; the winding up of the company, the sale of more than 49 per cent of Siúicre Éireann which, following the Stock Exchange flotation, will be a subsidiary of the holding company; the disposal of specified sugar assets including the Irish sugar quota held by Siúicre Éireann; the creation of a new class of shares in the company; the building up by one shareholder or a consortium of shareholders, other than the Minister for Finance, or more than a 15 per cent shareholding in the company after flotation. These points are dealt with in some detail in the Articles of Association of the holding company.
I should mention at this stage that it is the intention of the Government that the Minister for Finance will only dispose of sufficient shares on flotation to bring his holding down to 45 per cent.
To sum up, the special share is a device to (i) prevent the disposal of the controlling interest in Siúicre Éireann or the sugar assets; and (ii) prevent a shareholder or group of shareholders acting together from gaining control of the holding company.
I should add that it was as a result of discussions with the Irish Congress of Trade Unions and representatives of the beet growers, that I specifically included in the Bill a provision that the special share, which I have already referred to, may not be sold.
A further provision in section 2 which I should mention is that enabling the Minister for Finance following consultations with the Minister for Agriculture and Food to sell or dispose of his shares to such specified persons and on such terms and conditions as he may prescribe by regulation. The intention of this section is to facilitate the sale of shares to employees and beet growers — the Minister for Finance will dispose of some of his shareholding to these groups.
Section 3 provides that the two ministerial shareholders may exercise, including by attorney or proxy where applicable, all their rights attaching to their shares in the holding company. Section 4 deals with the allotment of shares and empowers the two ministerial shareholders to appoint nominees and to transfer shares to such nominees to act on their behalf. It sets out the rights and duties of nominees and the power of the Minister to issue directions. Section 5 grants relief from stamp duty on any agreement, transfer, conveyance, assignment or lease whereby any business, assets or liabilities of Siúicre Éireann, or shares held in or by it, are transferred to the holding company. This relief is a common feature of group reconstructions.
Section 6 provides that the rights — including pension rights — of employees of Siúicre Éireann or its subsidiaries enjoyed by those employees before the transfer date will continue to be enjoyed by them on that transfer date. Section 7 provides for the repeal of the Sugar Manufacture Acts.
Section 8 is a standard provision relating to any expenses arising under the Act. Section 9 is another standard provision and deals with the laying of regulations before the Houses of the Oireachtas. The section provides that regulations made under the Act shall be laid before each House of the Oireachtas as soon as may be after they are made and may be annulled by either House within 21 sitting days. Section 10 contains the usual citation and commencement provisions. The Act will come into operation on such day or days as the Minister for Finance may determine following consultation with the Minister for Agriculture and Food.
As I stated at the beginning, this is a very significant legislative measure which will be welcomed by all of us who wish to see the development of a major, Irish-based food company, which will be able to compete and expand in the European Single Market. I will be happy to respond to any particular queries in my reply to the debate.
I commend the Bill to the House.