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Listed meat company Affco Holdings is to buy the nation's biggest processor and marketer of bobby calves, Dairy Meats New Zealand.

Subsidiary Affco NZ has conditionally agreed to buy the business for $44.2 million, plus a further earn-out amount of up to $1 million, depending on Affco's share in the North Island market next season being more than 90 per cent of Dairy Meats' 2004 market share.

It will pay an expected full market value of $40.7 million for stock and debtors, $1.5 million for fixed assets, and $3 million for goodwill, quota, production history and intangible assets, and Dairy Meats will pay Affco about $1 million for specific quota rights.

The agreement is conditional on Dairy Meats' farmer shareholders' approval on December 13, with settlement scheduled for January 31.

Dairy Meats directors said Affco's offer was the most attractive received from meat companies and was endorsed on November 23.

Farmer shareholders are expected to be paid at least $3 before tax for every $1 share they hold, with some of the payments labelled as "capital" and tax-free.

Inland Revenue has been asked to rule on adding imputation credits to the payments, before the first instalment is paid out at the end of April.

Affco has said it will maintain the Dairy Meats bobby calf collections throughout the 2005 season and some staff will be offered continuing work.

A decade ago, Dairy Meats controlled almost all of the nation's bobby calf trade, but said its share of this year's kill had dropped to about half the 1.5 million animals available nationally.


Affco's buy

* Listed meat company Affco is to buy bobby calf marketer Dairy Meats.

* Affco will pay $44.2 million and up to a further $1 million depending on its market share in the North Island next year.

* Dairy Meats' farmer shareholders likely to get at least $3 before tax for every share they hold.