Asian private equity fund seeks to pluck Tegel for $605m

Tegel chicken on sale at the supermarket. Photo / Kenny Rodger

New Zealand poultry business Tegel Foods has been conditionally sold to an Asian private equity fund in a deal tipped to be worth $605 million.

Affinity Equity Partners, which has assets of US$3.5 billion, has applied to the Overseas Investment Office to buy Tegel from Australian private equity owners Pacific Equity Partners, ANZ Capital and British mezzanine financier Intermediate Capital Group, in what is likely to be New Zealand's biggest asset sale this year.

PEP bought Tegel at the end of 2005 for around $390 million. It then sold 37 per cent of the business to ANZ Bank managed funds and Australian company Lujeta in 2008.

Last year, PEP appointed the Australian-based investment banks Morgan Stanley and Greenhill Caliburn to consider options for the business, including a possible trade sale or sharemarket float.

At the time, a figure of $1 billion was touted for the company which had earnings before interest, tax, depreciation and amortisation (ebitda) of $79.6 million in its 2009-10 financial year.

An information memorandum released by the bankers showed plans to lift ebitda to $144.7 million by 2015.

The Australian Financial Review has put a figure of $605 million on the deal. Neither PEP nor Affinity have disputed the figure.

A spokesperson for both companies did not wish to comment publicly on the transaction.

Tegel chief executive and executive chairman Ron Vela told staff in a recent memo that the deal was likely to go ahead in early May provided it received Overseas Investment Office approval.

The change of ownership will also see Vela step down from his chief executive role, to be replaced by chief operating officer Andrew Stevens.

Vela said he would be working closely with Stevens over the next few months to ensure a smooth transition.

He promised staff it would be business as usual for them, despite the change in ownership.

Affinity Equity Partners has offices in Sydney, Singapore, Indonesia, Hong Kong and Korea. Tegel will be its first investment in a New Zealand-based company.

Sydney-based Affinity partner Brett Sutton said: "Tegel is the market leader in New Zealand and is a great business that offers plenty of scope for further investment and growth."

Tegel has about 52 per cent market share in New Zealand and also exports to Australia, which imports chicken only from New Zealand because of food safety reasons.