Richmond shares fly on PPCS bid

By PHILIPPA STEVENSON

Shares in meat company Richmond soared 26 per cent to as much as $3.04 a share yesterday as more than 1.5 million changed hands following a takeover bid from Dunedin-based PPCS.

The shares ended the day up 50c at $2.90.

The Hastings-based company's stock had been trading around $2.40 a share before the $3.05 a share bid by its southern rival, which is also Richmond's major shareholder.

A combined PPCS-Richmond would be a formidable meat company with revenue of over $2 billion and at least 27 meat plants - 14 in the North Island and 13 in the South - and peak season staff of around 8000.

PPCS, a farmer co-operative, said its move would cement the giant company in farmer hands, capture economies of scale and be competitive in livestock procurement and in the international marketplace.

Market analysts speculated that a single investor keen to stymie the deal - such as Lowe Corporation's Graeme Lowe, or Bernard Matthews' North Meats - could be buying shares to gain a blocking 10 per cent stake.

Lowe, who was unavailable for comment, sold his Lowe Walker meat plants to Richmond in 1998 but remains active in the industry through ownership of the country's biggest leather processor.

He is part-way through a 12-year agreement giving him access to Richmond's byproducts.

Observers suggested Lowe could want to ensure continued access to Richmond which might be at risk under PPCS ownership.

North Meats was the vehicle of British turkey king Bernard Matthews which unsuccessfully sought a major shareholding in Richmond when PPCS was forced to sell its shares in 2000.

The holding was gained by Active Equities but will be back in PPCS hands by the end of the month in a deal in which PPCS is paying $3.50 a share.

PPCS has argued that the price difference between that deal and the current offer reflected the difficult period the meat industry had gone through since the agreement was reached with Active Equities 18 months ago.

A senior executive with the Takeovers Panel, Kerry Morrell, said the panel would investigate the offer as a matter of routine, but it appeared that PPCS may be allowed to make a differentiated offer under transitional provisions introduced when the code came into force in July 2001.

There are transitional provisions within the Takeovers Act which apply to contractual rights established before June 30, 2001.

The panel would expect to have investigated the issue before PPCS formally presents its offer on January 21.

Yesterday, analysts described PPCS' bid as attractive.

Members of the Bell Group, a group of small shareholders that fought hard to repel PPCS' advances, wondered if the lure of cash would spell the end of their campaign to send the southerners packing.

One analyst said the key would be whether Hawkes Bay farmer shareholders could overlook their animosity toward PPCS long enough to accept the offer.

The meat industry was not "exactly flavour of the month", he said.

Richmond and the other listed meat company, Affco, had struggled and put in disappointing performances.

"A great deal of the wider investor market tends to sidestep that sector."

Bell Group member and former Richmond chief executive John Foster recalled what High Court judge William Young described last year as "gross commercial misconduct" by PPCS in gaining its original shareholding in Richmond in 1998.

"The cultures of the two companies are so different and the actions of PPCS have so antagonised some shareholders that shareholders might be doing PPCS a favour by rejecting their offer," Foster said yesterday.

But Bell Group members have only around 2 per cent of Richmond. The stake held by other farmers is believed to be around 6 per cent.

One source suggested farmers, Richmond staff with around a 5 per cent holding and other major longterm shareholders - mostly Richmond's overseas customers - could have around 15 per cent of the company.

More likely to be key to PPCS' bid is the Waitotara Farmers Holding Company, controlled by Richmond director Rod Pearce, which owns more than 7 per cent of Richmond.

One observer suggested that Pearce, who declined to comment, would have to be tempted to sell at least some shares.