New Plymouth Council fund sells Australia's largest dairy farm for A$250M

Tuesday 10th November 2015

New Plymouth District Council will end up owning about 19 percent of an ASX listed dairy products company as part of a deal that will see its investment fund sell Van Diemen's Land, Australia's biggest milk supplier, for a profit and allocate the net proceeds into other assets.

Taranaki Investment Management, the perpetual investment fund owned by New Plymouth District Council, has agreed to sell the Tasmanian dairy business to ASX listed shell company OnCard International for A$250 million. OnCard will sell up to 976 million shares at 25 Australian cents apiece, raising A$244 million toward the purchase. Up to A$46 million of the purchase price will be funded by the issue of up to 184 million shares to the New Plymouth-based fund, amounting to 18.9 percent of the enlarged company.

OnCard's shares jumped 9.7 percent to 62.5 Australian cents today on the ASX and have soared 90 percent on speculation manufacturers of dairy foods, especially infant formula, are set to cash in on booming demand in China. Rob Woolley is to chair the company, which will be renamed TasFoods. He is also chairman of Bellamy's Australia, an infant formula maker whose shares have soared 510 percent in the past 12 months. A2 Milk, which counts Australia as its biggest market, rose 5.2 percent to 81 cents on the NZX today. Its infant formula sales surged 445 percent last year.

Taranaki Investment chief executive Michael Trousselot said even though the Tasmanian dairy farm business had been a good investment for the council, Van Diemen's Land had been earmarked for sale because it had roughly doubled in value since being acquired in 2008 and amounted to 65 percent of the fund's investment portfolio as at June 30, or more than three times the target asset allocation into property.

The equity value of Van Diemen's Land is listed at about $165 million in Taranaki Investment's 2015 annual report. Trousselot said the A$250 million sale price included A$65 million of debt and other costs including taxes would have to be met. He declined to comment on the prospects of the new company, citing ASX listing rules ahead of the share sale.

Van Diemen's Land had been a "solid investment" and its performance had improved steadily, with production rising to 7.6 million kilograms of milk solids from 3 million kgMS, and revenue climbing to A$50 million, he said. It is currently the biggest supplier of milk to Fonterra Cooperative Group in Australia, although Trousselot declined to comment on the status of that arrangement.

In 2012, Fonterra said it wouldn't bid for the 25 Tasmanian farms when Van Diemen was looking to raise up to A$180 million and attracted prospective buyers.

According to Taranaki Investment's annual report, its perpetual investment fund is underweight in cash, fixed income, New Zealand, Australian, European, US and emerging market equities and alternative assets. Its target asset allocation for property is 20 percent.

The fund has paid $180 million in capital to the council in its eight years, having been capitalised with the proceeds of the council's sale of the local utility, Powerco.

OnCard shareholders will vote on whether to back the deal on Dec. 18.

In September, OnCard agreed to buy Meander Valley Dairy in Tasmania for A$2.1 million. The company is separately buying water rights separately held by New Plymouth Council.

BusinessDesk.co.nz

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