Fernz gets out of fertiliser

By Mark Reynolds

Fernz Corporation has finalised a series of deals to sell out of the fertiliser business in New Zealand, reduce its debt and secure the immediate future of a chemical processing plant at Manurewa.

The biggest of the deals will see Fernz sell its 40 per cent stake in Bay of Plenty Fertiliser for $75.3 million. Fernz will make a small capital gain on the sale and will use the cash to repay debt and strengthen its balance sheet for further acquisitions.

Fernz has sold 20 per cent of the stake to Norwegian-based Norsk Hydro, with the remaining 20 per cent taken up by the Bay of Plenty farmers cooperative that already owns the remaining 60 per cent of the company.

In a separate announcement, Fernz said it had reached an agreement for international drugs group Merial to distribute in Australasia the animal health products of Fernz subsidiary Nufarm. Fernz will continue to manufacture those products at a factory in Manurewa and will also manufacture some other products for Merial at that plant.

Fernz chief executive Kerry Hoggard said the deal with Merial will provide some "much needed" throughput at the Manurewa facility. An initial contract with Merial will fill about a quarter of spare capacity at the plant and there is potential for further production increases.

A third deal announced by Fernz yesterday has seen it enter into a licensing agreement with Coulter Pharmaceuticals of the United States to develop drugs discovered by Fernz subsidiary Pharma Pacific.

The licence gives Coulter exclusive rights to develop and commercialise an antibody that could be used for the treatment of auto-immune diseases and graft rejection problems in humans. Pharma will receive an upfront payment of $2.75 million for the agreement and a further $19 million over the next 2-3 years as Coulter develops the drug. Pharma will also receive royalties on any commercial sales.

Mr Hoggard said this agreement was especially important because it proved there was some value in technology that had been developed by Pharma.

Pharma had other potential commercial developments on its books and should steadily develop those over the next few years.

Mr Hoggard said analysts of Fernz had been sceptical about the ability of Pharma to arrange licensing deals but the agreement with Coulter demonstrated the company had some value.