Tegel’s directors recommend takeover

Substantial one-off costs, an unsolicited takeover offer, and protests over a new poultry farm are troubling New Zealand’s top poultry meat producer, Tegel Group.

Yurii Bukhanovskyi | Bigstock
Yurii Bukhanovskyi | Bigstock

Substantial one-off costs, an unsolicited takeover offer, and protests over a new poultry farm are troubling New Zealand’s top poultry meat producer, Tegel Group.

Acknowledging that it had been a “demanding year for the business,” Tegel Group CEO Phil Hand said that the firm’s underlying performance has been strong, and that a number of investments made recently would benefit the business in the long term.

The company broke its previous records for its poultry sales volume at 99,908 metric tons and revenue NZ$615.4 million (US$432.9 million at current exchange rates), according to the results for the full year of 2018 ended in April.

Growth was supported on the domestic market by strong sales in the free-range, value-added and convenience meal sectors. With the launch of 41 new products during the year, Tegel also achieved a greater presence in Australia through retail and food service channels.

However, non-repeating costs of around NZ$9.9 million attributed to industry compliance, ex-cyclone Gita, and organizational restructuring hit Tegel’s bottom line. Net profit after tax for 2018 stood at NZ$26.1 million, which compared with NZ$34.2 million the previous year.

A decline in the firm’s exports was blamed for a fall of NZ$1.8 million compared to 2017 in underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) to NZ$70.2 million for the 2018 fiscal year.

Tegel’s directors differ from the qualified auditors over the value of goodwill in the accounts for the year just ended, but the report states that this discrepancy has no impact on a recent offer made by Bounty Holdings for the Tegel Group.

Takeover offer recommended to shareholders

After reviewing an offer from Bounty Holdings New Zealand Limited to acquire all the ordinary share of the Tegel Group, a group of independent directors is recommending shareholders to accept the offer.

A wholly owned subsidiary of Philippines-based Bounty Fresh Foods, the firm’s New Zealand entity offered to pay NZ$1.23 per share in an unsolicited takeover offer proposed in April this year, and followed up with a full takeover offer at the end of May.

Supporting the directors’ recommendation, Tegel’s Chairman David Jackson said that the offer price was fair, and represented a premium on the historic trading price. Already, the offer’s 50 percent acceptance condition has been satisfied, he said, and Bounty will have effective majority control of the company if the offer is declared unconditional.

Finally, no competing offers are likely to be forthcoming, and Tegel’s share value may fall if the offer from Bounty is rejected, added Jackson.

The offer period runs until August 25.

Protests over Tegel’s plan for new poultry farm

Earlier this week, residents of Arapohue held a street protest outside Tegel’s headquarters in Auckland against the company’s proposed new broiler farm for more than 1.3 million chickens in 32 poultry houses in New Zealand’s most northerly region, Northland.

According to Newsie, leaders of the Maori meeting grounds at Kapehu and others complained they had been excluded from the consultation over the proposed farm, which would be close to traditional sites. Full public hearings on the proposal are scheduled to start in August.

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