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The driver behind Affco subsidiary Dairy Trust's takeover bid for Open Country Cheese admits the new venture could be a high-stakes gamble - but says it will offer greater growth potential for Open Country shareholders who accept its offer.
Andrew Talley - a director of Affco Holdings, who also sits on the Open Country Cheese board - said if the Dairy Trust offer succeeded, it would let Talley's Fisheries, Dairy Investment Fund and Balle Bros Holdings consolidate their combined shareholding of 42.5 per cent and give the remaining shareholders the chance to invest in a company with a national reach and a wider product mix.
"Dairy Trust will be a lot riskier but it's going to have a lot more growth potential," said Talley, a day after Affco announced Dairy Trust's intention to make a full offer for shares in Waikato-based Open Country.
Affco said on Monday that Talley's Fisheries, Dairy Investment Fund and Balle Bros had already agreed to the offer, under which 1.68 new Dairy Trust shares - valued at $1.34 - would be issued for each Open Country share - valued at the market price of $2.25. However it said the offer needed the approval of Affco shareholders to proceed, as well as 50.1 per cent acceptance.
Affco announced the creation of Dairy Trust in March, saying it would operate four dairy processing plants around the country, and list on the New Zealand Exchange within a year.
Talley said there had been a lot of interest from shareholders of Open Country - which trades on the unlisted register - who wanted to invest in Dairy Trust.
Although Dairy Trust is wholly owned by Affco, it will eventually list and Talley said it had subscription agreements to issue 30 per cent shareholding to parties including Balle Bros and Dairy Investments.
While Dairy Trust is seen as Affco's diversification into the dairy industry, Talley said that when the share offer goes through, Affco's shareholding will "significantly dilute".
Open Country chief executive Alan Walters said the takeover offer was not considered hostile or unexpected, but that a formal offer had yet to be received and the company would be making a response in around a week, after the independent directors had time to consider an independent advisers report.
