Talleys makes play for Affco

A takeover bid for food producer Affco Holdings by Talleys Group is further evidence of a scramble for ownership of the country's dairy manufacturing assets, according to sharebroker Peter McIntyre.

Yesterday's offer for the 23.7% of Affco that Talleys does not already own or has agreement to buy will increase its shareholding in Open Country Dairy from 17% to about 47% which, according to Craigs Investment Partners broker Peter McIntyre, appeared to be the motive behind the move.

It was no coincidence the takeover bid by Nelson-based food producer Talleys was announced in the same week Chinese company Bright Dairy took over the processing and marketing arm of Canterbury dairy processor Synlait Ltd, and Singaporean-based Olam International made a takeover offer for New Zealand Farming Systems Uruguay, Mr McIntyre said.

"Principally, their [Talleys] aim is to increase their stake through acquiring Affco and therefore their stake in Open Country Dairy."

In June, the Motueka-based food producer reached agreement with Affco's second-largest shareholder, the Spencer family investment vehicle Toocooya Nominees, to buy 23.46% of the shares for 37c a share - the same price being offered for the remainder of Affco shares.

Mr McIntyre felt the offer was too low, considering Talleys, in March, 2006, offered 39c a share to take a majority stake in Affco.

In the last year Affco's share price has ranged from 33c to 43c.

"They are not providing enough premium on the price. I think they need to offer a higher price, say in the low 40s, to entice remaining investors," he said.

Affco's third-largest shareholder is National Nom-inees NZ Ltd, with 2.8% of the company's shares.

Mr McIntyre said corporate manoeuvring this week showed just how seriously foreign countries viewed future food supplies, and he believed Talleys' hand was forced by Olam moving on New Zealand Farming Systems Uruguay (NZFSU) and Bright Dairy on Synlait Milk.

Earlier this week, Bright Dairy announced an $82 million takeover of Synlait Milk, which will enable the privately owned Canterbury company to build a second milk drier, upgrade to the manufacture of high grade infant formula and gain access to the Chinese market.

Similarly, Olam this week offered 55c a share for the remaining shares in NZFSU it did not own, in a move seen as securing future food supplies from Uruguayan dairy farms being developed by NZFSU in South America.

In the background is Chinese-backed Natural Dairy's attempt to buy 16 Crafar family farms in receivership and plans to establish a dairy processing factory.

Talleys is a privately-owned family business established in 1936 that produces seafood, vegetables and icecream.

It jointly owns with Affco a sheep processing plant at Awarua near Invercargill.

Affco owns a further six processing plants in the North Island.


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