German supplier buys majority T&G shares

German fruit supplier BayWa Aktiengesellschaft is making a takeover play for the 114-year-old horticulture giant Turners & Growers.

And a pre-bid agreement with majority shareholder Guinness Peat Group means it already has 63.5 per cent of the shares locked up.

The offer is for all shares in NZX-listed Turners & Growers at $1.85 a share, valuing the company at $216.5 million, with conditions including getting consent under the Overseas Investment Act 2005.

Turners & Growers, which listed on the stock exchange in 2004, traces its history back to 1883 when Edward Turner arrived from England and set up a fruit and flower shop in Auckland, with Turners & Growers founded in 1897.

Produce grown by Turner & Growers, which merged with pipfruit exporter ENZA in 2003, includes apples, hothouse tomatoes and citrus.

Munich-based BayWa said Turners & Growers' presence on five continents would enable BayWa to expand its offering in the fruit business and to access global growth markets, particularly Asia where Turners & Growers was already established.

BayWa chief executive Klaus Josef Lutz said the takeover was a ground-breaking step towards globalisation for the company.

"We will become one of the world's most important suppliers of fruit, as Turners & Growers is represented in all key markets on all continents," Lutz said.

"The door to Asia, the highest growth market for fruit, is now wide open for BayWa's fruit trading business."

Turners & Growers has 45 companies worldwide including growing, packing and transport operations, and gross turnover of $847.2 million for the year ended December 31. The company said it had received a notice from BayWa of its intention to make a full offer and would appoint an independent adviser to report on the merits. "Shareholders may wish to wait until they receive that report and T&G's response statement before taking any action in respect of the offer," it said.

Turners & Growers' share price closed down 1c yesterday at $1.69.

Forsyth Barr analyst John Cairns said Turners & Growers' performance over recent years had been lacklustre.

The company's core distribution business was fairly mature "and what they've been doing is diversifying into growing their own produce across a range of products but some of those activities are still in the early stage". The company had developed its own proprietary apples and kiwifruit, which was an income stream they were in the process of developing. "So there are some interesting things occurring within the company but it's had very disappointing earnings performance ... very low return on equity and it just doesn't produce an economic return on the funds employed," Cairns said.

There was a net tangible asset backing per share of about $2.40 plus "but the reason the share price is where it is at the moment is because it doesn't generate an economic return on the assets", he said.

Guinness Peat Group said BayWa was an international trading and services company in core segments of agriculture, building materials and energy, with revenue of about +euro+8 billion ($14 billion) in the 2010 financial year.

BayWa was a leading supplier of German premium fresh fruit to food retailers and a supplier of pipfruit from organic production. Guinness Peat Group chief investment officer Anthony Eisen said the company believed the offer was attractive. Fruitnet.com reported that other companies understood to have considered bidding included United States private equity firm Paine & Partners, Australian grower-packer Costa Exchange and an unnamed Japanese firm.