Seeka seals $25m expansion

Micheal Franks CEO of Seeka. Photo/file

Bay of Plenty-based Seeka Kiwifruit Industries has agreed to buy the business and assets of leading Australian kiwifruit company Bunbartha Fruit Packers Pty and its associated entities for NZ$25 million.

Once completed, the acquisition will make Seeka - already New Zealand's biggest kiwifruit grower and a leading post-harvest operator - the largest kiwifruit grower in Australia, chief executive Michael Franks said.

"The acquisition is aligned to our strategy of becoming a premium produce company," he said. "As with our activities in New Zealand, it builds on our foundation in kiwifruit, but will allow us to add other fruit varieties."

In addition to having an estimated 80 per cent of Australian kiwifruit production, Bunbartha Fruit Packers is also a major grower of nashi pears, as well as plums, apricots and cherries. Seeka has acquired 505 hectares of land in Shepparton, Victoria, including approximately 240 hectares of orchard land, as well as all prime water shares linked to the properties.

Seeka, which is listed on the NZX, has established a wholly owned Australian subsidiary, Seeka Australia Pty, to acquire the business and handle debt financing. The purchase price will be funded through debt facilities, with settlement including an element of deferred payment.

Seeka currently sells approximately A$15 million ($16.8 million) of produce to Australia, and has a strong presence in kiwifruit. The company also had a bumper year for its avocado sales to Australia in the 2014-15 season, generating the sector's top OGR for its New Zealand growers.

Mr Franks said the Australian kiwifruit crop was typically harvested a couple of months earlier than in New Zealand, and the acquisition would provide Seeka with a longer selling window. "Our businesses are strategically aligned," he said.

"Both sell to similar customers at different times of the year, and now have the opportunity to integrate selling and marketing operations. The fruit produced and marketed by Bunbartha broadens and complements Seeka's existing offering of kiwifruit, avocados and kiwiberries."

Seeka expected to add further value to shareholders through the synergies that both businesses could deliver from internal optimisation and market expansion, he said.

Seeka chief financial officer Stuart McKinstry said Bunbartha Fruit Packers' business had revenue of approximately $17 million, which was expected to increase Seeka's earnings before interest, tax, depreciation and amortisation, by from $3.2 million to $4 million, before any synergy gains arising from the acquisition. The deal was scheduled for settlement on August 20.

The vendors, Jamie Craig and John Karl, would be contracted to remain involved with the business to ensure its success.

"We're buying the assets of the business, but we are keeping all the key staff to retain their experience, including the owners, who will help us to run the business," Mr McKinstry said.

"We want to ensure that we don't lose the experience that has been built up over a long time. Strategically the acquisition is a very good move for Seeka and its growers."

The Australian company has completed its kiwifruit harvest and Seeka would be focusing on gearing up for the first harvest of cherries, which begins in November.

Mr Franks said there was potential in the transaction to expand the orcharding area over time and Seeka expected profits from the purchase to occur in the 2016 financial year.

The acquisition had its roots in a 50-50 joint venture between the two companies started a year ago to produce pollen.

"That's been a very successful business, with 100 per cent of the pollen going to export, mostly in Japan and elsewhere in Asia," he said.

Under the terms of the acquisition, Seeka will wholly own the pollen business.

"Seeka will continue to seek value-accretive acquisition opportunities while reviewing its current mix of asset holdings to ensure they fit consistently with strategy and earn their cost of capital," Mr Franks said.

"Our current focus is on the integration of Bunbartha Fruit Packers into the Seeka group and putting management, compliance, safety and reporting systems in place."