Delegats brand to expand

By IRENE CHAPPLE

"This," said Jim Delegat as he faced the media yesterday at his office in Auckland's Viaduct Harbour, "is a simple story of an existing business with a global opportunity."

It was just gone 10.30am but Delegat and his sister Rose, who own winemaker Delegat's Group, had already offered around glasses of their highly acclaimed flagship brand, Oyster Bay.

Coffee was accepted before the two settled down to detail the company's $35 million unsecured capital notes offer, which will fund expansion and precede a possible listing on the NZX main board next year.

The winemaker is New Zealand's fourth largest and exports to the United Kingdom, the United States, Canada and Australia.

Sales for the 2004 year to June are forecast to be $31.6 million and are expected to almost double for the 2005 year, to $60.4 million.

A forecast net profit of $1.2 million for the 2004 year is expected to leap to $5.1 million by 2005.

The capital notes offer, which is fully underwritten by Westpac, will be used to repay bank debt and fund new wineries in Marlborough and the Hawkes Bay.

The company already has more than 1700ha of vineyards, leased or owned by an associate, in the two regions.

Further expansion funding of at least $40 million will be raised next year through listing on the NZX's main board or private investment.

The company has long been seen as an investment opportunity by local and overseas investors but offers have thus far been spurned.

The Marlborough winery will be used to process the 2006 vintage, with the Hawkes Bay vineyard ready for the 2008 vintage.

Staff numbers are expected to increase from 150 to 300 within three years.

The notes will carry an interest rate of 9.75 per cent a year and mature in November 2007.

The interest rate will increase by 1.5 per cent if the second phase of equity raising is not completed by November next year.

The notes route was taken to strengthen the offer for the second phase of investment.

The forecast increase of grape harvest - New Zealand Winegrowers have predicted it will triple over the next three years - did not bother the Delegats.

"There is some surplus wine around and there are certain areas where sales have not been reached," said Rose Delegat. "But they don't have the strength of the Oyster Bay brand."

The brother-and-sister team took over the family business in 1973 after the death of their father, Nikola.

Rose Delegat says there are no expectations that Nikola's young grandchildren will continue in the family business.

"I don't think our business is about building a family heritage; rather, getting a business that will reward our family well."

The offer

* $35m worth of unsecured capital notes

* Minimum subscription $5000

* Maturity date November15, 2007

* Interest rate 9.75pc, rising to 11.25pc if $40m share offer not completed by November 15, 2005

* Offer opens June 28, closes July 23