SCF assets expected to attract attention

Premium South Canterbury Finance assets - Scales Corporation, Helicopters (NZ) Ltd and Dairy Holdings Ltd - will attract a lot of attention as receivers McGrathNicol look to dispose of them.

The assets, formerly owned by South Canterbury founder Allan Hubbard through his Southbury Corporation, were tipped into South Canterbury to shore up its ailing finances in February this year.

Craigs Investment Partner broker Peter McIntyre said all three companies were "quality assets" and each was unique in its structure and ownership.

"These were all Allan Hubbard's jewels in his business crown, before he pushed them into South Canterbury to improve equity ratios," Mr McIntyre said.

South Canterbury was placed in receivership last week, owing $1.6 billion to about 35,000 investors, who will be paid out under the Government's retail deposit guarantee scheme, to the tune of $1.775 billion; which includes first ranked creditors' payments.

Receivers Kerryn Downey and William Black, of McGrathNicol, have called for expressions of interest in South Canterbury Finance group's assets and had already fielded "a significant number of inquiries from prospective buyers".

Part of South Canterbury's restructuring was the provision of $152.5 million of new equity in February, in conjunction with the acquisition of Helicopters NZ Ltd and Scales Corporation Ltd, whose total after-tax profits were $29.8 million.

In October, South Canterbury had signalled it was considering selling its shares in two dairy companies; Dairy Holdings Ltd, which operated 58 farms and South Island Farm Holdings, which had 20 farms.

Mr McIntyre said yesterday the sale of Dairy Holdings Ltd could be the most complex and have the most options for receivers, noting South Canterbury's 33.6% share of the asset base was about $225 million.

He said Landcorp could possibly take a stake, offshore interests could be looking for a dairy sale or Dairy Holding's existing shareholders could combine, possibly raising cash through a full or partial float.

South Canterbury's 33.6% share, the majority shareholding, had a previous book-carrying value at $75 million after liabilities, with the total values of assets at $665 million and liabilities of $407 million.

Dairy Holdings had general reserves funds of $311 million while revenue was around $56 million.

"There's also the option of Dairy Holdings being broken up into smaller parcels for investors," Mr McIntyre said.

Mr McIntyre said based on the sale of Helicopters (NZ) and Scales Corp to South Canterbury at $162.5 million earlier in the year, Helicopters' value could be around $80 million-$85 million.

"It has global appeal as an offshore investment, with operations around the world," he said.

Its after-tax profit in 2009 of $16.2 million was attractive to would-be buyers, but Mr McIntyre noted there might not be many tourism-related companies in New Zealand able to buy it.

Its operations are understood to be one of the largest in the world, leasing out helicopters, with bases in New Zealand and Australia, Laos and Cambodia.

Scales Corp, one of the country's largest apple producers at more than two million cartons annually, was likely to be the hardest to sell of the three companies, Mr McIntyre said.

Last year its after-tax profit was booked at $13.6 million, but this year its before-tax profit was down to $10.1 million - with Mr McIntyre valuing the company at around $60 million.

"[However] Turners & Growers have already said they are not that interested in buying," Mr McIntyre said.

A Scales spokesman has said "Scales Corporation operates autonomously from the activities of its majority shareholder, South Canterbury Finance, and its day-to-day operations will not be affected by the receivership".