Private equity firm Navis Capital will take a controlling stake in Dunedin-based Mainland Poultry, subject to Overseas Investment Office approval, in a deal reportedly worth about $300 million.
Earlier this month, the Australian Financial Review’s Street Talk column reported Australian private equity firms were lining up to bid for New Zealand’s largest egg supplier.
Navis Capital was understood to be acquiring about two-third of the shares for about $300 million, BusinessDesk reported.
A letter to staff from managing director Michael Guthrie, director Murray Valentine, MainFeeds general manager Jeff Winmill and Zeagold general manager Hamish Sutherland said the company’s shareholders would retain a "significant" shareholding.
Current operations were not expected to change and Mainland’s senior management would stay in their present positions.
Founded in 1998, Navis Capital has operations throughout Asia Pacific with more than $US5 billion ($NZ7.27billion) in equity capital.
It was a significant investor in the agriculture industry in Asia and businesses included duck farms in China, aquaculture in Vietnam, chicken processing in Thailand and animal genetics in the UK and China.
Mr Guthrie said the company was excited to announce the transaction.
"Mainland is a great company and Navis has the capital and experience to assist us in our growth," he said.
The transaction was subject to a few important regulatory and procedural steps, including OIO clearance, and it was hoped that would be completed by the second half of the year.
Mainland Poultry was established in 1997, based on an Waikouaiti hen farm, Otago Poultry. It was controlled by Mr Guthrie with about 76.6% of the shares, while Mr Valentine held about 18% and Mr Winmill’s family owned 5.3%.
In February, Mr Guthrie confirmed the company was being advised on options for the business, given its capital expenditure requirements.
Shareholders had been considering their options for the investment needed to replace equipment to meet the requirements of the Animal Welfare (Layer Hens) Code of Welfare 2012, which called for the staged phasing out of battery cages in favour of larger colony cage systems or free-range.
At the time, Mr Guthrie said shareholders knew they were not getting younger and "may want to have a pathway to liquidity".
Navis Capital said between $40million and $80million of capital expenditure would be required, building a company with export opportunities and with the potential to go public down the track.
Mainland Poultry’s production types range from New Zealand’s largest free-range farm, Woodlands, at Dunback, to its caged operation.
It produced about one-third of New Zealand’s eggs through its egg production business Zeagold Foods, which has the Woodland and Farmer Brown brands, processed eggs products for the food industry and produced a range of animal feeds through MainFeeds.
Law firm MinterEllisonRuddWatts was an adviser to Mainland Poultry along with ANZ Corporate Advisory.MinterEllisonRuddWatts partner Silvana Schenone said the deal was complex due to multiple bidders and some "creative thinking" had to be applied to ensure the best outcome for Mainland Poultry.
The interest in the company, and the reached agreement, highlighted the international appeal of New Zealand’s thriving and highly regarded agriculture sector, she said.
Navis partner Phil Latham said he had to be a little circumspect in commenting because the deal still required OIO approval. But he talked enthusiastically about Mainland’s highly-productive operations and the ability to export its intellectual property as well as its output to other markets in Asia.
He said the laying percentage for Mainland’s birds was among the highest in the world and exceeded the average 80% level — the number of birds that lay an egg every day — achieved across Asia. New Zealand had a very high standard of biosecurity and its poultry industry didn’t face the perils in Asia such as disease borne by migrating birds. First, though, Mainland has the capital costs of meeting new welfare rules for its 1.2million layer birds.
"What we would want to do is to quite quickly enable Mainland to make the investment to go from cage to colony (cages) to free-range," Mr Latham said.
"We would like to see a very large portion of what Mainland does in five years being free-range and barn. We’re very much in favour of the regulations. We think we can be quicker than it has taken in Europe. ‘‘The current owners couldn’t get their hands on the level of capital to do that."
Mainland anticipated the capex would be "a minimum of $40 million and could be as high as $70 million to $80 million".
The investment would be a mix of equity capital and third-party lending and Navis "was prepared to bring more than its share of the capital".
The details would be subject to the shareholders’ agreement.
- Additional reporting BusinessDesk
