Livestock Improvement Corp is seeking shareholder approval to buy a half share in Israeli dairy farm management firm Afimilk Agricultural Cooperative for US$70 million (NZ$108.7m).
The New Zealand dairy herd genetics company confirmed this morning that it had signed a conditional deal for the acquisition, which it intends to fund primarily through debt provided under LIC's existing banking facilities.
The company said dividends received from Afimilk would be sufficient to meet all interest costs, while also likely funding a portion of principal repayment. The acquisition was not expected to negatively affect future dividends to LIC shareholders.
Afimilk develops, manufactures and markets advanced systems to manage dairy farms, with key products including farm management software, cow wearables, in-line milk meters and automation technology. The firm operates in more than 50 countries.
The company reported revenue of US$57.4m (NZ$89.1m) in the year to December 31,2019, up from US$53.4m in the 2018 financial year. Earnings before interest, tax, depreciation and amortisation from core operations came in at US$14.2m in 2019.
LIC chair Murray King said the acquisition will help give the company access to key data used to develop herd improvement services and agri-tech for New Zealand farmers to improve access to on-farm technology solutions.
"Afimilk has been profitable over the years, has no debt, and has historically paid dividends to its shareholders," he said.
"The 50 per cent stake will give us shared governance and an equal say in the strategic direction of the business."
He said LIC's farmers would benefit from Afimilk's expertise in advanced technology solutions and on-farm management systems.
"If the investment proceeds, we will look to integrate these solutions with LIC offerings to make access to the technology easy for our shareholders and farmers.
"We believe there are likely to be further development opportunities for in-line milk meters, to increase LIC's resilience to the threat of disruption to access to pastoral dairy farming data posed as a result of the move away from traditional herd-testing services.
"The investment will also help to drive future growth by opening LIC's access to data on other farming methods beyond pastoral held by Afimilk."
A trading halt on LIC's farmer-owned shares was lifted following the NZX announcement this morning.
LIC's 10,000 farmer shareholders are being asked to vote on the deal on April 7. Further information will be available in a Notice of Meeting to be sent to shareholders.