KEY POINTS:
Rural services firm Allied Farmers has conditionally agreed to buy finance company Nationwide Finance for $33 million.
The purchase is from the Hanover Group, jointly owned by multi-millionaires Mark Hotchin and Eric Watson.
Nationwide provides property and commercial finance, and has total assets of about $160 million and equity of $20 million.
Allied Farmers group chief executive David Bale said Allied's objective was to grow its finance business to have $400 million of finance assets within two years.
Last October it amalgamated Allied Farmers Finance and Prime Finance to form Allied Prime Finance, which had total assets of $158 million and equity of more than $20 million.
Once Nationwide was purchased the combined financing activities of Allied Farmers would rise to $320 million of assets and $40 million of equity.
The combination of Allied Prime Finance and Nationwide Finance would provide significant market presence and a solid platform for future growth across the whole group, Mr Bale said.
The finance companies would be able to offer financing instruments that covered Allied Farmers' extensive involvement in the dairy industry through livestock, and rural services.
Buying Nationwide was also consistent with Allied's strategy to focus on property and commercial financing. Combined, the two companies would have less than 12 per cent of their lending in motor vehicles.
Allied said the purchase price would be subject to final adjustments for changes in net asset value from December 31 up to the date of settlement.
Payment would include $25 million in cash, with the balance through a two-year unsecured vendor loan.
The agreement remains conditional on the approval of Nationwide's trustee and the shareholders of Allied, and on completion of an audit of Nationwide's financial statements for the six months to December. Settlement was expected in early May 2007.
Allied Farmers made a net operating profit of $846,000 for the six months to December 31, up from $758,000 a year earlier.
Pre-tax operating profit was $1.43 million, with Allied Prime Finance declaring a pre-tax profit of $2 million.
Allied Farmers shares last traded at $2 yesterday, the lowest price in the past year. The highest share price during the 12 months was $2.62 last April.
- NZPA
