By Bob Dey
A joint venture between Wanganui-based farm manager Agricultural Investments and Farmers Mutual Group of Palmerston North plans to take control of listed company Dairy Brands.
Their joint venture company, Agricultural Resources, will buy the 75 per cent of Dairy Brands held by Savoy Equities for $12.56 million.
The price of
34.5c is well above recent trades between 23c and 25c but well below stated asset backing of 43c.
It will mean a loss for Savoy Equities, controlled by Jihong Lu, but one which director Kerry Haycock said yesterday the company was happy with.
Savoy bought its Dairy Brands shares at 32c to 43c in 1997 and since then the number of dairy farms it holds has been cut from 32 to 14. Mr Haycock said Savoy was looking at other investments and the sale price, though at a loss, was more a matter of determining opportunity costs.
At Farmers Mutual, group product manager Grant Uridge said the joint venture had long-term plans to grow Dairy Brands but was first looking at sealing the transaction and placing some of the shares with "parties with a rural focus."
He said Farmers Mutual would retain some shares, but he could not say yet how many. Its partner, Agricultural Investments, is owned by Cliff King of Havelock North and Lyn Williams of Hastings and has about eight dairy farms through Wanganui, Taranaki and Hawkes Bay.
Mr Uridge said the joint venture was prepared to pay an above-market price for the controlling interest in Dairy Brands because "we see some intrinsic value in the company that the market has not reflected."
Dairy Brands was floated in 1995 through a rights issue to shareholders in Apple Fields. Savoy, then called Parapine Timber, took control in July 1997 for $10.5 million at 43c a share.
