Seeka will pay as much as $6.25M for Glassfields as it chases growth outside of kiwifruit
Seeka Kiwifruit Industries [NZX: SEK], the fruit grower and coolstore and packhouse operator, has agreed to buy Glassfields (NZ), the fruit ripening and delivery services business, for as much as $6.25 million as it looks for growth away from the stricken kiwifruit industry.
The price paid for the private company is confidential, but Seeka chief executive Michael Franks told BusinessDesk the Te-Puke company will pay a fixed price of between $3.75 million and $6.25 million on April 17. The range is based on five times expected 2015 earnings before interest, tax, depreciation and amortisation of between $750,000 and $1.25 million.
Auckland-based Glassfields holds the New Zealand rights to import and distribute Sumifru bananas, pineapple and papayas from the Philippines exclusively and will see Seeka enter the retail services sector and add bananas, New Zealand's most popular fruit, to its product range.
Seeka is looking for growth after reporting a 55 percent decline in net profit of $2.7 million in calendar 2013. Local kiwifruit growers have been struggling with the outbreak of Pseudomonas syringae PV actinidiae since 2010, which infected about 40 percent of the nation's orchards, with gold fruit varieties hardest hit.
"Kiwifruit is the foundation to our business and this is more about an expansion into the produce area that can complement our core business," Franks said. "It's part of putting the company back on to a growth strategy."
Last month Seeka sold back its 20 percent stake in Opotiki Packing and Cool Storage for $3.1 million, after buying the shares in 2005 for $3.7 million with the intention to take 100 percent ownership before PSA changed the company's priorities. Part of the post-PSA strategy has included selling off non-core assets, reducing debt, restructuring operations and limiting capital spending.
Seeka will pay for Glassfields using existing cash and debt facilities.
The company's share price was unchanged at $2.60 and the tightly held stock has traded just 23 times this year. The shares have advanced 24 percent the past year, outpacing a 3.1 percent decline in the NZX SmallCap Index.