Edgy growers wary of Zespri share raid

By PHILIPPA STEVENSON

Kiwifruit growers keen to shut out Enza-style corporate raiders have forced under-capitalised marketer Zespri to re-examine a proposed share issue.

Zespri, which has revenue of around $700 million but equity of just over $4 million, planned to increase capital to $15 million by the end of the financial year through a $6 million share offer, a separate $1 million share issue to growers who have expanded their orchards, and by retaining around $4 million of grower earnings.

Zespri aims to lift equity to $40 million by the end of 2003-2004.

But growers nervous of a raid on Zespri similar to the recent takeover of apple marketer Enza by corporates Guinness Peat Group and FR Partners have called for changes to the share offer endorsed at the annual meeting in June.

Katikati growers Allan Dawson and Alan Sutherland have spearheaded the move for the change, suggesting the capital be raised through other means, including an issue of non-voting, redeemable preference shares, non-voting ordinary shares or capital notes. Zespri's plans will only dilute share value, they say.

"Any capital-raising for Zespri should be in a form which adds value to shareholders' investments and is non-voting to preserve the co-operative nature of the industry. There are no disadvantages for Zespri, but there are enormous advantages for its shareholders."

The two have forced Zespri to call a special meeting to debate the issue after getting the backing of 12.5 per cent of the industry shareholding, or growers representing more than 7.5 million of the 54 million trays of kiwifruit production. Zespri has yet to name a date.

The growers fear that if Zespri goes ahead with its original share issue plan, a corporate could meet the grower qualification for shareholders at minimal expense and then buy up "overhang" shares - those not taken up by existing growers - to get an industry foothold. A raider could also pounce on the shares of cash-strapped growers - a move successfully employed by GPG and FR to gain control of Enza.

The former single-selling producer boards, the Kiwifruit Marketing Board and the Apple and Pear Marketing Board, were re-regulated on April 1, establishing Zespri and Enza with similar grower-owned structures restricting a single shareholder to no more than 20 per cent of shares.

GPG and FR qualified as growers by leasing orchards, and won control of Enza with a joint share offer netting them just under 40 per cent of the shares.

Mr Dawson said the capital-raising debate was likely to be a forerunner to lobbying the Government for Zespri to be restructured as a co-operative.

Zespri chairman Doug Voss refused comment on the issues to be raised at the special meeting before all growers had been informed.

However, in the April edition of Zespri publication Kiwiflier, Mr Voss rejected capital being raised from promissory notes. It was the responsibility of shareholders to fund capital and as promissory notes were paid back over time, Zespri would offer concurrent share offers to ensure that capital was built and owned by shareholders.

"At the end of the day, I remain very confident that the proposed capital structure is appropriate for our business," he said.

Mr Sutherland has taken issue with Mr Voss describing the comments as nonsense.

"It is the shareholders' responsibility to accept the risk in an investment as well, yet Zespri is quite happy to have growers underwrite Zespri commission. It is okay when it suits Zespri, and not okay if it doesn't suit Zespri."