Turners & Growers (T&G), the major New Zealand-based produce group, has agreed to buy Hawke’s Bay-based apple grower-packer-shipper Apollo Apples for an initial sum of more than NZ$43m.
The Auckland-based group, which is majority-owned by German conglomerate Baywa, will pay NZ$36.05m upfront for Apollo, plus an additional amount equivalent to the working capital of the business, which is put at around NZ$7.1m through December 2013.
T&G indicated it would pay up to a further NZ$8m in cash in the following four years if performance targets are met.
Apollo grows, packs and exports around 1.4m cartons of apples each year and owns or leases 500ha of planted apple orchards in the Hawke’s Bay, according to T&G.
The company owns and operates a large packhouse and coldstorage facility in Whakatu, Hastings, which was the first purpose-built, controlled atmosphere facility in New Zealand. Prior to deregulation of the country’s apple business, it formed part of T&G division Enza’s network of export-grade packing and coldstorage centres.
Apollo’s founders Bruce and Ross Beaton will stay with the Apollo business for at least the next four years, and all of its 120 permanent employees will be offered employment within the T&G group, according to a statement from T&G.
T&G said the acquisition of Apollo forms a key part of its global growth strategy, particularly in meeting international demand for Southern Hemisphere supply. It also enables Apollo Apples to expand in its key markets, the company added.
While the takeover must yet gain approval from the Overseas Investment Office, T&G CEO Alastair Hulbert hailed it as a milestone for his company.
“We are delighted that Bruce, Ross and the Apollo team have agreed to merge Apollo with Enza. Apollo is well respected within the industry and is perfectly aligned to our Enza business strategy with its complimentary skills and capabilities,” said Hulbert.
“The acquisition demonstrates our commitment to further invest in the New Zealand apple industry, improve grower returns and increase New Zealand apple exports. We need to serve the demand of a greater number of export customers and markets.”
Bruce Beaton, managing director of Apollo Apples, also welcomed the deal, and took the opportunity to applaud T&G’s parent company Baywa for its investment in New Zealand’s apple business.
“This is a fantastic opportunity to continue Apollo’s growth strategy,” Beaton remarked. “Apollo has witnessed improvements at Enza since BayWa invested in T&G. We welcome such supportive shareholders who can support the investment we require to grow Apollo.”
T&G bounced back into the black in 2013 after two years of losses. Higher volumes, prices increases, wider access to new markets, and crucially, the growth of demand in Asia, helped to lift export receipts.
Apollo, which is enjoying the windfalls of a highly profitable 2013/14 apple export campaign, looks to have chosen an opportune time to sell. In the year ended 31 December 2013, its sales reached NZ$50m, with EBIT coming in at NZ$6.3m. The company’s fixed assets, including land, infrastructure and biological assets, are estimated to be worth NZ$57m.
As part of the negotiations, T&G will also purchase a 50 per cent shareholding in Apollo Foods, a small processed apple business that’s expected to compliment T&G’s own food processing arm EnzaFoods.
Completion of the deal is subject to approval from the Overseas Investment Office and the assignment of certain material contracts – the last of which are expected to be satisfied within four months, T&G said.
T&G shares, of which Baywa owns 73 per cent, remained unchanged after the deal yesterday, trading at NZ$1.90. The company today (16 April) declared that it would pay a dividend of NZ$0.05 on each share on 29 May.