EastPack, New Zealand's largest kiwifruit packer following its merger with Satara earlier this year, is aiming to grow and consolidate further with a proposed takeover of post-harvest specialist Aerocool, a move which it admits is designed to prevent the latter's proposed merger with rival operator Apata.
EastPack chairman Ray Sharp has tabled an offer to acquire Aerocool in a cash deal worth NZ$0.90 per share, on condition that Aerocool growers support the change of ownership and that the company has debts of no more than NZ$3.5m.
Sharp said EastPack's directors believed the offer was more favourable than Apata's and, given their concerns over the current level of debt at Apata, would be in the best interests of all shareholders.
'We understand the primary motive of Aerocool's major shareholders is to achieve economies of scale and operational benefits from being part of a larger group, however we do not want Aerocool to pursue a sub optimal transaction on the basis that its board feels amalgamation with Apata is the only option available to them,' Sharp commented.
He also revealed that a review of the proposed Apata deal had led EastPack to view its potential impact on Aerocool shares – of which EastPack holds 3.5 per cent – as negative.
'As an Aerocool shareholder, EastPack does not wish to see the value of its investment impaired by the proposed amalgamation with Apata - and I'm sure neither do other Aerocool shareholders,' he said, adding that EastPack believed an exchange ratio of one Aerocool share for one Apata share was 'unfair' on Aerocool's shareholders.
'We are not willing to accept a 13 per cent reduction in net asset backing per Aerocool share when Apata shareholders are benefiting from a 17 per cent increase in net asset backing per share; and an increase in the total secured bank debt of the company from approximately NZ$1.00 per tray to NZ$1.88 per tray without clearly demonstrating how the company will service this level of debt going forward.'
Disputed value
Accepting that shareholders might yet decline EastPack's offer, Sharp said the Aerocool board did consider an independent valuation obtained as part of the Apata due diligence process – including a maximum value of NZ$0.35 per Aerocool share – as more likely representing the fair value than historic trading figures.
'The EastPack offer would give small, non-grower shareholders the opportunity to realise 90 cents cash per Aerocool share rather than roll the dice with Apata in the hope that bringing two smaller post-harvest operators together will deliver adequate cash returns to retire in excess of NZ$$13m of secured bank term loans,' he argued.
EastPack said it felt the Apata proposal would lead to an 'untenable position' for minority shareholders and accordingly was due to vote against the deal.
'We will not remain as a shareholder if Aerocool proceeds with the amalgamation and will exercise our right to receive a fair and reasonable price for the shares we currently hold,' Sharp indicated.
'We are also prepared to take up the challenge of ensuring that all minorities who elect to vote against the proposed amalgamation with Apata exercise their buy out rights receive a fair and reasonable price.'
As well as handling kiwifruit, both Aerocool and Apata are involved in packing avocados.
Under New Zealand rules governing takeovers, EastPack must now wait a minimum of 14 days before it can make its offer.
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