Palmerston North-based Speirs Group is selling its finance arm to Allied Farmers for $5.6 million.
Payment will include $3.1m cash and new shares in Allied Farmers to the value of $2.5m, leaving Speirs Group with about 8.85 per cent of Allied Farmers, the company said today.
Immediately afterthe transaction, Speirs Group would subscribe for $2m of perpetual bonds in Allied Nationwide Finance, a member of the Allied Farmers group.
Conditions of the deal included gaining required approvals from Speirs Group shareholders and debt obligation holders.
The Allied Nationwide bonds would be perpetual and carry an initial annual interest rate of 13.16 per cent, payable quarterly. Speirs Group had a put option to call on Allied Farmers to redeem the bonds in five years time at face value.
Speirs Group said it had been considering the sale of the Speirs Finance business to give it more scale in a consolidating market.
Speirs Finance had continued to perform well despite challenges presented by the global credit market and the flow-on impact of this on the New Zealand market and for finance companies generally.
But it had become increasingly apparent in recent months, given the current environment and upcoming government regulation for finance companies, that the future of Speirs Finance was enhanced by being part of a larger finance business with a broader portfolio of activities and enhanced funding opportunities.
"The board has decided this course of action will provide a better outcome for the company as a whole than an alternative of seeking to acquire other finance companies to build scale to compete effectively in the changing borrowing and lending markets," Speirs Group said.
Speirs Group expected to remain listed on the NZX alternative exchange, primarily with investments in Speirs Nutritionals and Speirs Foods, along with the shares in Allied Farmers and the bonds in Allied Nationwide.
Speirs Group shares last traded yesterday at 35c, having ranged between 32c and 95c in the past year.
