AsureQuality partners with France's Bureau Veritas to buy Dairy Technical Services

AsureQuality, the state-owned food safety and biosecurity services firm, has teamed up with French testing and inspection group Bureau Veritas to buy out its partners in Australia's Dairy Technical Services for an undisclosed sum.

Auckland-based AsureQuality will own 49% and Bureau Veritas 51% of Melbourne-based DTS under a joint management approach, the state-owned enterprise's chief executive John McKay said. AsureQuality already owned 25% of the Australian food and beverage testing company and had previously declined to comment on reports it was looking to buy out DTS' other shareholders Fonterra Cooperative Group, Murray Goulburn Cooperative, and Warrnambool Cheese and Butter Factory (WCB).

McKay declined to comment on the sale price, citing commercial sensitivity, although in separate statements WCB said it would record an $A8.4 million gain on the sale of its 13.3% percent holding and Murray Goulburn said it would reap A$18 million for its 25.3 percent stake. Fonterra didn't say what it would get for its 36 percent share.

Last December, the Australian Financial Review reported the buyout talks valued DTS at between $A80-100 million.

"We've been an investor in DTS for some time and it's always been on the cards to increase our investment, so it's been signalled in our strategy and we're following through with that," Mr McKay said. "We think it sits very well with us in terms of meeting the needs of our customers and it increases our position here in the market, strengthens our position and helps us build capability and capacity in Australasia."

Mr McKay said the deal will be funded through a mix of cash reserves and debt and that he was "very comfortable" with AsureQuality's mix of debt and equity. As at December 31, the SOE held cash and equivalents of $4 million with borrowings of $19.3 million, or 47%  of total equity.

AsureQuality valued its stake in DTS at $10.4 million as at December 31, when it reported a first-half profit of $1.7 million on revenue of $89.6 million.

DTS reported a profit of $A4.1 million on revenue of $A50.1 million in the 12 months ended April 30, 2015, up from earnings of $A3.6 million on sales of $A45.6 million a year earlier, according to financial statements lodged with the Australian Securities & Investments Commission in August. The report said revenue and profits "very significantly exceeded targets" with "significant premiums" from emergency testing.

At the time, the Australian company said it expected increased competition and pressure on customers to cut costs would weigh on the broader market, and that its 2016 budget reflected tougher conditions and increased investment in business development.

Mr McKay said all three dairy groups who sold their shares in DTS would remain customers.

"If you look globally, consumers around the world look at New Zealand and Australia as a source of safe and high-quality food, so it's important that we continue to work with these customers to increase that and build on that," he said.

(BusinessDesk)