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Open Country Cheese shareholders are being urged to hold on to their shares in the Waikato-based dairy exporter after meat processor Affco announced an imminent takeover bid by its subsidiary Dairy Trust.
Open Country's independent directors - including founder and former deputy prime minister Wyatt Creech - "strongly advised" shareholders to not sell until they had time to consider an independent report on the merits of an offer valuing their shares at the market price of $2.25. Creech refused to comment further. Affco said the offer for Open Country, which trades on the Unlisted market, would boost Dairy Trust's "financial and operational strength" by aligning the two companies more closely.
The Hamilton-based meat processor announced the formation of Dairy Trust in March as part of its plans to diversify into the dairy industry, which is experiencing record commodity prices on the global market.
Open Country has warned shareholders of lower-then-expected results for this year due to lower whey powder production volumes, more waste disposal costs and the volatile currency.
Affco said the offer was conditional on 50.1 per cent acceptance. It said Talleys Fisheries, Dairy Investment Fund and Balle Bros - which together hold 42.5 per cent of Open Country - had already agreed to the terms.
Since Talleys owns 50.01 per cent of Affco, approval by the meat processor's shareholders would be sought at a special meeting this month.
Following concerns about the Talley family having shareholdings in both companies and both companies now being involved in dairy, Open Country told its shareholders last month that it was not part of the Dairy Trust venture and promised any future relationship would be on a "normal commercial arm's length basis".
Under the offer 1.68 new Dairy Trust shares will be issued for each Open Country share acquired, at a value of $1.34 per Dairy Trust share.
Affco chairman Sam Lewis said the offer was fair to the remaining shareholders despite there being no market premium.
"Other parties have accepted it. All we're doing is in fairness making that offer available to everyone else."
An appraisal report from Simmons Corporate Finance assessed the proposed takeover as fair and reasonable to Affco shareholders not associated with Talleys, an Affco statement said.
