Talley's Group launched an offer to raise its stake in Open Country
Dairy, New Zealand's second ranked dairy processor, in the latest sign of the
acquisition drive surrounding the industry in Oceania.
Talley's Group, the family-owned seafood to vegetables group
which already owns 55.5% of Open Country Dairy, revealed an offer to raise its
stake in a deal valuing the dairy processor at NZ$320m ($263m).
Already Olam International, the Singapore-based agricultural
trading giant which owns nearly 25% of Open Country Dairy, said it would tender
up to 14.99% to the offer, gaining up to NZ$46.5m from the sale – but leaving
itself with at least a 10.0% stake, and avoiding being squeezed out of the
"Based on the terms of the agreement, the effective sale
price of Olam shares in Open Country Dairy is expected to be at or above the
current carrying value of its Open Country Dairy investment," Olam added.
String of deals
The takeover deal comes amid a boom time for the dairy
industry, enjoying near-record dairy commodity prices thanks to soaring demand
from importers such as Russia and, in particular, China, whose own milk
producers are failing by a distance to keep up with soaring consumption.
Besides increased wealth, and the spread of a refrigerated food
distribution network, China's dairy demand is being fuelled by a surge in
infant formula demand as mothers take an increasing place in the workforce.
And Oceania, and in particular New Zealand, with its export
volumes and proximity to China is proving well placed to fulfil this demand.
The market conditions have attracted a spate of deals, with China's
Shanghai Pengxin Group buying 16 New Zealand dairy farms last year, and on
October unveiling a deal to buy control of Synlait Farms, which owns 4,000
hectares of farmland and some 13,000 dairy cows, and is a supplier to processor
In September, the 27,000-hectare Mount Pember station, whose
operations include dairy support, was sold to North American investors, for a
Meanwhile, Australia's Warrnambool Cheese & Butter has
agreed a takeover by Canada's top processor, Saputo.
'Will release cash'
However, for Olam International, the sale of some of its Open
Country Dairy stake offers the chance to raise cash, following some investor
criticism, led by activist investor Muddy Waters, over the sustainability of
borrowings run up during a multi-year expansion drive.
"The transaction will release cash for Olam while still
maintaining product off-take arrangements with Open Country Dairy, which are
strategically important for Olam's dairy supply chain business," a company statement
The deal was revealed after the close of Singapore markets,
where Olam shares closed up 1.0% at Sing$1.51.