Turners and Enza to merge, then float

Former monopoly apple exporter Enza will list on the Stock Exchange early next year after merging with local produce marketing heavyweight Turners & Growers, according to media reports.

Market sources spoken to by the Sunday Star Times are expecting an announcement early this week that a management team from the two companies will recommend they merge.

There will also be an indication of a public float for the as-yet unnamed new company in the first quarter of 2003. It is understood the float will seek to raise up to $100 million of new capital from retail and institutional investors.

Lead managers for the float are expected to be JBWere, who are also organising the float of Turners Auctions, which has been spun off from Turners & Growers. The prospectus for that float is expected within 10 days.

Enza is 100 per cent-owned by Guinness Peat Group (GPG), which also owns 46 per cent of Turners & Growers. Ecuador's Noboa Corporation, supplier of Bonita bananas, is the second largest shareholder in Turners & Growers, with a 25 per cent stake.

Existing major shareholders in both unlisted companies are not expected to sell down their stakes in the float. However, existing public shareholders in Turners & Growers are likely to mean a "free" float of $150 million.

GPG director Tony Gibbs said the merger of the two companies would create a significant global produce marketing business. It is expected to have annual sales of $1.2 billion.

"It will be a big contributor to the national economy and will benefit from synergies in the merger which will add value for shareholders, suppliers and customers," he said.

The synergies are in shipping, transport, container management, overseas importer networks, warehouse facilities, cool stores and shared services like finance and information technology.

Mr Gibbs said GPG intended to remain a significant shareholder in the new company. It is understood work on pricing the issue has yet to be done, but sources expect a newly floated company to have shareholders funds of $300 million-$400 million and to immediately take its place in the NZSE-40 Capital Index.

The new company will be exporting produce from pumpkins to peas. Mr Gibbs said Turners had an extensive onshore network that could supply the offshore Enza network with products other than apples and pears.

The unlisted former family-owned company wholesales and distributes a variety of fruit, vegetables and cut flowers and supplies packaging equipment to the fresh produce industry. From the Enza side of the merger, apples and pears will be a big part of the new company's business.

Last year the government removed Enza's monopoly over the $700 million-a-year apple and pear export industry in a deregulatory move that opened the door for exporters to bypass Enza.

While Enza now faces up to 40 competitors in the export field, it still handles up to 50 per cent of the nation's crop. Many orchardists do business with one of the smaller competitors, but still sell the bulk of their crop through Enza, which had the experience and proven track record in respect of security of payments. Part of the challenge for the new company will be to hold the confidence of orchardists, especially in Hawke's Bay, where there is bitterness over the GPG buyout of Enza shareholders.

The possibility of the new company also exporting kiwifruit has been raised. At present the export monopoly is held by Zespri International, the exporting arm of Zespri, the former Kiwifruit Marketing Board. Backers of the new company are suggesting a successful reincarnation of Enza might see it getting into the kiwifruit exporting business.

They see horticulture, like dairying, as something New Zealand does well and for which it had a deserved international reputation. They expect significant interest in any capital raising.

- NZPA