Australasian Food Corporation Limited (AFC) advises that it has entered into an agreement (Agreement) with NZ Silveray Group Limited (NZSG) to purchase all the shares in National Dairy Group Limited (NDG) from NZSG.
The purchase price is $480,000 payable as follows:
a) $200,000 is payable on 8 December 2015(Completion);
b) Subject to NDG’s distributor in China, Guangdong Farmside Dairy Development Limited (Chinese Distributor), being up to date with payment of its fees under its Distribution Agreement (Distribution Agreement) with NDG (see below), a further $140,000 is to be paid on the second anniversary following Completion.
c) Subject, again, to the Chinese Distributor being up to date with payment of its fees under the Distribution Agreement, a further $140,000 is to be paid on the third anniversary following Completion.
As NZSG is AFC’s major shareholder, the transaction represents a purchase from a related party, but the purchase price is less than 10% of AFC’s average market capitalization and therefore shareholder approval for the transaction is not required.
NDG’s Distribution Agreement with its Chinese Distributor is for an initial term that commenced on 1 July 2015 and expires on 30 June 2018.
Under the Distribution Agreement, NDG has the option either to purchase milk powder and other products (Products) and sell them to the Chinese Distributor or to arrange for suppliers to sell the Product to the Chinese Distributor.
Under the Distribution Agreement, the Chinese Distributor must pay NDG a fee of NZ$200,000 plus GST per annum for the right to use the brands Farmside, Morning Dairy and Morning Honey in relation to sales in China of Product acquired under the Distribution Agreement.
Under an agreement NDG has with GMP Dairy Limited (GMP), NDG has the right to acquire the Farmside Brand from GMP at no cost, subject to achieving prescribed sales of the Product. NDG intends to acquire the Farmside Brand upon the prescribed sales being achieved. Under its agreement with GMP, NDG is able to acquire Product from GMP for on sale to the Chinese Distributor or arrange for sales to be made by GMP to the Chinese Distributor.
Brent King, Director of AFC said, ”The Directors are very pleased with this purchase. It fits AFC’s strategy of entering the food export business from New Zealand to China. NDG is registered with the Ministry of Primary Industries as an Animal Products Exporter, which allows NDG to export a range of animal products.“
“AFC is looking to develop its business in the food trading sector. We are reviewing a number of options and we will announce developments as soon as they occur,“ said Mr. King.
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