Affco privatisation no certainty

Workers at the Rangiuru Affco meatworks. File photo / Bay of Plenty Times

A takeover bid for Affco is not a signal for change at the listed meat processor, says Talley's Group director Andrew Talley.

An offer for all shares was a requirement of the Takeovers Code and not a deliberate effort to secure all the stock, Talley said.

"There's no burning ambition for us to move to 100 per cent [and] privatise Affco, but we are realistic that might be an outcome of the process and it may not be, and we're equally comfortable with either," he said.

The fishing, vegetable and ice-cream company already owned 52.8 per cent of Affco and had a pre-bid agreement to buy a 23.5 per cent stake from the Spencer family's Toocooya Nominees at 37c a share.

"We were identified as the natural buyer of that stake given our existing shareholding in Affco and there was no timing pressure on either party really. If it happened, it happened," Talley said.

"Like us, the Spencer family were equally happy to sit and retain their existing stake."

Talley's would offer 37c a share to all shareholders, the same as the market price and gave the company a market capitalisation of $187 million.

Market commentator Arthur Lim said the offer might be attractive to some but not all shareholders.

In the market yesterday someone was trying to buy Affco shares at 38c each, Lim said.

"When one thinks of the Talley's and the likes, their focus is very much on the very long-term investment horizon and it's not like they need dividends to come out of the investments," he said.

"The way that they play the game I can't see them increasing the bid in the short-term because, certainly, they've been quite happy to sit in there for quite a while. There is no suggestion that this time round they would be in a big hurry."

Andrew Talley said the share purchase was a consolidation of a shareholding the company had had in Affco for the past 10 years.

"The problem in the meat industry [is] it needs to be a consolidation in capacity not shareholding, that's the real issue," Talley said.

"In time, I think you'll see consolidation and rationalisation. What's going to be the catalyst for that we don't know."

Affco chairman Sam Lewis said the company was always reviewing its plants. "But we think our configuration is reasonably right at this stage, with our six plants in the North Island and a couple in the South Island."

Speculation about consolidation or rationalisation in the meat processing industry had been going on for the past 20 years of his involvement in the sector, Lewis said.

Affco recommended shareholders took no action until they had the benefit of an independent advisor report and the assessment of directors.