Christopher Adams: Dual listing is possible for Tegel

Tegel is the country's biggest poultry producer and has about 1700 staff. Photo / Kenny Rodger

New Zealand chicken producer Tegel could end up being Australasia's first major public share offering of 2016.

But the Auckland-based firm's Asian private equity owner, Affinity Equity Partners, will have to address the elephant in the room when it resumes talks with investors early next year, ahead of a potential IPO and dual NZX/ASX listing in the first quarter.

Why didn't Tegel go ahead with a trade sale?

Affinity hired Goldman Sachs and Deutsche Bank back in August when it began a sale process for the country's biggest poultry producer, which has roughly 1700 staff.

Tegel was shopped around trade players, including Thailand's Charoen Pokphand Group and global meat processor JBS.

It apparently garnered some interest from potential industry purchasers.

That process, however, wound up late last month in favour of an IPO, tipped to place an up to $1 billion valuation on the business.

Obviously Affinity decided it could get a better price out of going public, and a market source said a trade sale had only ever been a "distant possibility" for Tegel.

The source said fund managers had shown good interest in the company during a non-deal roadshow earlier this year.

But the market can be suspicious of IPOs backed by private equity firms, whose business model is based on buying low and selling high.

Investors may be wary of being viewed as a more lucrative option for offloading Tegel, which Affinity purchased for $605 million in 2011.

And a $1 billion valuation would appear to be a hefty multiple on the bottom-line results the company has been reporting.

In the last financial year its holding company, Ross Group Holdings, reported a 30 per cent gain in pre-tax profit, to $10.8 million, from revenue of $562.7 million.

Net profit at the firm, which had net assets of $288.5 million, fell 38 per cent to $8.7 million thanks to a $2 million tax expense compared with a $5.8 million tax benefit a year earlier.

The company reported interest and finance charges of $35 million for the year.

Still, food related stocks seem to be in vogue with investors, which could bode well for the chicken firm.

NZX-listed alternative milk producer A2 and Australia's Bega Cheese have enjoyed solid share price gains recently.

And Blackmores, the Sydney-based health supplement maker, last month became the first company on the S&P/ASX 200 to have a share price cross the A$200 threshold on the back of strong sales growth to China.

Tegel has been growing exports to markets including Asia and the Middle East.