Scales raises $25m to refinance T&G stake, mulls Enza merger
BUSINESSDESK: Scales Corp has raised $25.2 million in a rights issue to repay funds borrowed to build a blocking stake in Turners & Growers and says it would consider a merger between T&G’s Enza unit and its Mr Apple business.
Christchurch-based Scales sold 12.6 million shares at $2 apiece in a fully-subscribed five-for-11 rights issue after borrowing $20 million from controlling shareholder Direct Capital to invest in T&G, according to documents lodged with the Companies Office.
Scales acquired 10.3% of T&G last year, thwarting a full takeover by of the fruit marketing company by Germany’s BayWa Aktiengellschaft.
Munich-based BayWa ultimately secured some 73% of T&G for about $158.2 million, meaning the company will remain listed on the NZX.
At the time, Scales said it wanted to participate in consolidation of the industry.
"The company wants to work with T&G in relation to the Enza business to identify efficiencies to improve returns to growers," chairman Mark Hutton said in the March offer document.
"Any funds raised from the offer in excess of what is needed to repay the loan and to meet expenses and costs will be used to fund future investments as opportunities are identified by the directors."
One such way to consolidate the industry would be through a merger of Mr Apple and T&G's Enza unit, Scales said in its investment statement.
"If a merger did eventuate, provided T&G remained a listed company, this could allow the company to receive listed T&G shares in exchange for the Mr Apple business, which would be a valuable asset to the company and therefore its shareholders," the document said.
Direct Capital acquired South Canterbury Finance's 79% stake in Scales for $44 million, with the New Zealand Superannuation Fund and Accident Compensation Corp as co-investors.
Government figures show fruit exports were worth $1.56 billion in the 12 months ended April 30. That is 3.3% of New Zealand's annual exports of $46.67 billion.
Scales made a loss of $8.8 million in the six months ended December 31 on revenue of $94 million, according to financial statements attached to the offer document.
Managing director Andy Borland said the result was caused by a change in the company's balance date and it earns "minimal revenue" during the latter six months of a calendar year.
"The actual trading performance has been largely in line with expectations while the result includes two negative adjustments to the carrying value of our assets being the biological assets [apple trees] and the carrying value of Silverstream Industrial Park," he said.
"I am confident that despite the uncertainty of the current global financial conditions, the outlook for Scales is for continued growth and improvement."