NZX-listed meat processor, Affco, has advised against a takeover offer from South Island-based food producer Talley's Group, unless shareholders needed to receive a dividend.
In June, Talley's Group signed a pre-bid agreement with Toocooya Nominees to make a full cash takeover bid at 37c a share, with Toocooya agreeing to sell its 23.5% stake in Affco for $43.86 million.
With the Toocooya stake, Talley's would control 76.2% of Affco.
The takeover offer was within an independent valuation range of between 34c and 44.4c per share, based on Affco's core business and its 35.45% stake in Open Country Dairy.
Affco's independent directors did not intend to accept the offer and recommended investors hold on to their shares.
However, since the company had not paid a dividend since 2006 as it reinvested profits in the company, investors who wanted dividend payments may prefer to sell their shares and seek other options, directors said.
There was a limited ability to easily buy or sell Affco shares as they were traded very little. Affco had invested significantly in its operations and the stock was one of the few opportunities for the public to gain some exposure to the meat and dairy industry, independent advisers Campbell MacPherson said in their report on the offer sent to shareholders today.
At 37c a share, the company would be valued at $870.28 milion.
Founded in 1904 as the Auckland Farmers Freezing Co-operative exporting meat to Britain, Affco Holdings listed in 1995 after a debt restructure and a $100 million public share offer at 50c.
Talley's first acquired a shareholding in Affco in mid-2001, and since increasing its stake to 52.83% in April 2006 it has increasingly controlled the company.
Affco's share price has seesawed from 52c on listing day to a low of 15c in December 2002, and last traded yesterday at 37c.
Affco operates plants in the Bay of Islands, Waikato, Bay of Plenty, Hawke's Bay, Wanganui, and Feilding. It also has a joint venture with South Pacific Meats at Motueka, and hide plants at Napier and Wiri.
Toocooya holds agricultural interests of the family of former pulp-paper millionaire John Spencer, and Peter Spencer, one of the nation's biggest corporate meat farmers.
The offer opened on August 6 and closes on September 6, unless extended, and was not conditional on a minimum acceptance level.