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Dairy processor Dairy Trust is planning a full takeover of Waikato-based Open Country Cheese as it looks to become a nation-wide player.
Chief executive Mark Fankhauser said the Auckland headquartered company expected to have its first milk powder plant in Southland up and running in about four weeks, with consents in place for potential sites in South Taranaki, Waikato and Northland.
The company, which was set up last year by meat processor Affco, would like to build another plant this year, he said.
Dairy Trust yesterday said it planned to buy the 47.6 per cent it did not already own of Open Country Cheese Company - co-founded by former Deputy Prime Minister Wyatt Creech.
The offer price would be $2.75 in cash, which was a 31 per cent premium to the last market price of $2.10, Dairy Trust said.
Open Country Cheese production included cheese, butter oil, whey powder concentrate and whole milk powder, with a capacity for about 70,000 tonnes of product each year, Fankhauser said.
"Shares have been trading anywhere between $1.90 to $2.10," he said.
"At $2.75 we think it reflects fair value but that's obviously subject to a valuation report yet to be done."
A report by independent advisers Ferrier Hodgson in relation to a takeover bid by Dairy Trust last year gave a valuation range at that time of between $3.10 and $3.47 a share.
Auckland shareholder Henry Hall said it was highly unlikely he would accept the the new offer, which seemed low given the valuation was only a year old.
"I consider that there is great loyalty amongst many long-term shareholders and they may not wish to sell their shares at the offer price suggested," Hall said.
Global product trader Olam International is the second biggest shareholder in Open Country Cheese and had entered into a pre-bid agreement, giving Dairy Trust a committed total holding of 72.4 per cent.
Meanwhile, Olam planned to subscribe for new shares equivalent to 19.48 per cent of Dairy Trust and also buy 5.51 per cent from existing shareholders.
Fankhauser said the new share issue would raise about $78 million but the partnership with Olam brought more than capital.
However, Dairy Trust had no desire to compete with the world's biggest dairy exporter, Fonterra.
"We're a niche player and we really don't have a desire to ever consume more than what the market's organically growing at," said Fankhauser.
Dairy Trust chairman Sam Lewis said the involvement of Olam would complement the strengths of Dairy Trust.
Affco Holdings, of which Lewis was also chairman, owned 44 per cent of Dairy Trust, which would reduce to about 34 per cent should the plans be successful. Olam had a proven track record as a customer for Dairy Trust and Open Country Cheese, Lewis said. Approval from Dairy Trust shareholders would be sought at a meeting planned for September.
