GPG says talks begun on merging ENZA with Turners & Growers

By NZPA

Thursday 20th June 2002

Guinness Peat Group said today that talks had begun on the feasibility of merging its 46 percent owned Turners & Growers with its fully owned Enza Ltd

GPG director Tony Gibbs said the companies had formed a joint team of management representatives to scope a full merger of the two companies, subject to shareholder approvals and any necessary regulatory consents.

"Preliminary study shows that while the two operate without any significant areas of business duplication there are a number of synergies which, if released, could add value to shareholders, suppliers and customers.

"These include shipping, transport, container management, sourcing, overseas importer networks, warehouse facilities, coolstores, and shared services such as finance and IT (information technology)," he said.

Fruit maketer Turners & Growers has recently spun off car auction firm Turners Auctions Ltd, which trades on the unlisted market and is mulling a full Stock Exchange listing and "modest" capital raising later this year.

Enza is New Zealand's biggest pipfruit exporter with exports last year of $534.6 million.

Former Enza major shareholder Bill Birnie of FR Partners said when GPG was taking over Enza earlier this year that GPG was the logical buyer because of its ownership of produce marketer Turners & Growers.

GPG shares were up 1c at $171 today.

The domestic apple market was deregulated in 1993, but the Apple and Pear Marketing Board retained its control of pipfruit exports until the end of the decade.

Enza -- a brand created by the board so that its fruit was not tied only to "brand New Zealand" -- became a grower-owned company in place of the board in April 2000, in a compromise form of deregulation sought by the National Government.

As a private company, its 20 million shares were held by 1500 growers who had to own an orchard to hold shares.

But among the sacrifices made by growers were a loss of control over exports from companies other than Enza, and what proved to be an ineffectual cap on shareholdings.

By August 2000, it had been raided by GGP and FR Partners, which between them held nearly 40 percent of Enza's shares and effective control the board.

GPG and FR Partners leased apple orchards to qualify as shareholders and bought shares, mostly at $1.65 a share. Some shares were sold by growers for as little as 30c each.

Ironically, it was later disclosed that prior to the corporate takeover, independent financier Grant Samuel and Associates had evaluated Enza as being worth between $101.9 million and $121.4 million -- equivalent to a value of $5.09-$6.07 on individual shares.

At the time, the company was still exporting more than 90 percent of the national pipfruit crop, but its group on this waned as increasing number of growers moved to "collaborative" exporters who were looking to cherry-pick the most affluent markets for NZ apples.

But after Agriculture Minister Jim Sutton announced his intention to deregulate Enza altogether, the industry was plunged into turmoil with moves by the Enza board -- and the corporate shareholders -- to make growers pay for the company's $50 million in old foreign-exchange losses and $4.5 million of Port Napier loading systems debt.

The corporates wanted to have these old debts paid while it still controlled exports. Eventually the debts were split, with Enza paying $20.85 million worth of historical foreign exchange losses.

The dispute and the deductions hit grower confidence and left some growers strapped for cash, and by May this year, GPG was able to acquire the entire shareholding, including the 19 percent held by FR Partners.

This has left it free to build a vertically-integrated business in which pipfruit are sold through its Turners and Growers operation, which dominated the domestic fruit and vegetable trade.

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