Tru-Test in $10m share buyback

Agri-tech company Tru-Test Corporation has completed a $10 million share buyback while the stake of major shareholder KTT has been boosted from 21.7 per cent to 39.6 per cent.

KTT is a limited partnership owned by Australian private equity firm Kestrel Capital.

Under the share deal approved at the private company's recent annual meeting, Tru-Test acquired 9.5 million of its shares - 23.6 per cent of its capital, at $1.05 a share. That is the same price paid in February to competitor Gallagher Group, which sold down its entire 19.9 per cent stake after two failed attempts to gain regulatory approval for a takeover bid.

The board's rationale for the latest share buyback was to provide its 155 shareholders with a chance to shed some shares in the largely illiquid stock. The company cancelled shares acquired in the buyback, which was funded by the sale of 5.7 million new shares to KTT and a $4 million Bank of New Zealand loan.

An independent adviser's report on the deal by Simmons Corporate Finance said the positive aspects outweighed the negative. KTT's voting rights increased under the Gallagher buyback but it was granted a Takeovers Panel waiver from having to sell these until other shareholders voted at the annual meeting to allow it to retain them.

Simmons Finance said the buyback was unlikely to reduce Tru-Test's attraction as a takeover target and forcing KTT to sell its additional voting rights could have put downward pressure on the share price.

Tru-Test is the world leader in milk metering with more than 90 per cent global market share, holds over half the global market for electronic animal weighing, is a dominant player in electric fencing, and is a major contract manufacturer. Its latest financial results for the year ending March 31 show revenue significantly boosted by strong sales in the US and Latin American markets and also by last year's $74.5 million acquisition of Dairy Technology Services, which manufactures farm holding tanks for the local dairy industry.

Revenue from continuing operations was boosted by a third to $130 million and earnings before interest, tax, depreciation and amortisation (ebitda) rose 177 per cent on the previous year to $14.8 million. Net profit for the year was $2.1 million.

Board chairman John Loughlin said there had been a step-change in the company's underlying revenue and projected earnings as a result of last year's DTS and Radian purchases. He said earnings from DTS were New Zealand-based and that helped offset some of the currency hit Tru-Test took on its exports.

He said the group was still looking for further acquisitions.