Talleys bids for control of Affco

Fishing company Talleys today offered an 11 per cent premium for a controlling stake in meat company Affco Holdings.

Talleys, already a 40 per cent shareholder in Affco, offered 39c a share to lift its stake to 50.01 per cent, valuing the meat processor at $197m.

Affco needed a large and supportive shareholder to support it during a tough and volatile period for the New Zealand meat industry, Talleys said in a statement.

Shares in Affco closed on Friday at 35c after trading between 34c and 50c over the past 12 months.

Talleys has been a shareholder of Hamilton-headquartered Affco since 2001 and has steadily increased its stake over the last 4-1/2 years through on and off market transactions and through supporting two capital raisings by Affco.

A fortnight ago Affco said issued a profit warning, saying it expected its full-year profit to be lower than last year due to lower prices, currency concerns and the weather.

The company said its financial results for the first four months of the year were "well down" on the same period last year, and it expected this to lead to a lower result for the year ending September.

Affco blamed lower market pricing, the high New Zealand dollar and limited production due to weather conditions.

Other meat companies are reporting tough times, with Dunedin-based PPCS expected to report an ugly result later this month.

Talleys' director Andrew Talley said the bid was consistent with Talleys' intention to be a long-term and substantial shareholder in Affco and participant in the New Zealand meat industry.

"While acknowledging the offer passed a control threshold, the level of shareholding sought is more a creature of compliance with the Takeovers Code rather than about acquiring control," he said.

"Once a shareholding is in the 'no fly zone' of 20 to 50 per cent, there are very limited opportunities to increase the level of investment."

He said the only practical step available to Talleys was through a partial takeover offer, which by regulation must exceed 50 per cent.

Andrew Talley said it was no secret that operating conditions were extremely tough and the meat industry was in poor shape.

Aggressive competition, new capacity and heightened volatility around exchange rates, stock numbers and commodity prices were affecting earnings.

"If the current state continued, all players in the industry will need to make some tough decisions about capacity, assets and cost structure."

He said it was easier for a company to make those tough decisions with a settled and stable share register and a long term, substantial and supportive shareholder.

Mr Talley said his company was confident an independent report to be commissioned by Affco would conclude that the offer price was fair.

Established in 1904, Affco is one of New Zealand's top four meat slaughtering companies, with 10 plants in the North Island including at Wairoa, Rangiuru in Tauranga, Imlay at Wanganui and Moerewa in Northland, and employs around 2800 staff.

Mr Talley said Talleys had no plans for change at Affco.

Affco processes and exports more than 150,000 tonnes of meat a year.

It is the only meat company listed on the stock exchange with farmers who supply stock being many of its shareholders.

Affco shares last traded at 35c and have fallen from 50c in August.

- NZPA