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BusinessDesk: Pastoral Dairy Investments seeks to raise $75 mln to buy dairy farms, flags Unlisted listing

Rural News
BusinessDesk: Pastoral Dairy Investments seeks to raise $75 mln to buy dairy farms, flags Unlisted listing

Pastoral Dairy Investments, a company associated with farm management firm MyFarm, plans to raise at least $75 million by selling shares to the public and tapping high-wealth individuals to invest in dairy farms.

PDI will offer 25 million shares plus oversubscriptions at $1 apiece, the company said in a statement. Investors will pay 30 cents up front with the remaining 70 cents payable in tranches. The company said there’s no limit on the total that could be sold though the minimum is $25 million.

It will also take in at least $50 million from high net worth individuals and said it may be attractive to charitable investors. The company may initially buy eight or nine farms, most likely in the South Island, directors said on a conference call.

The company will seek an Unlisted listing once the initial capital has been raised. Investors will have the option at their first annual meeting to vote on a full NZX listing.

Directors of PDI are dairy industry stalwart Malcolm Bailey, the chairman, John McDonald, chairman of Pohutukawa Private Equity, and Alister Body, a Canterbury dairy farmer and director of DairyNZ.

Fees charged by a management company overseeing the investments have been designed to by competitive with share-milking arrangements, they said.

The offer opens later this month and closes on April 20.

PDI will be managed by MyFarm Asset Management LP, led by Andrew Watters and Grant Rowan of MyFarm, along with Craigs Investments Partners chairman Neil Craig and Brian Cloughley, a former director of agribusiness investment banking at Craigs.

The company said its structure is “based on a variation of a proven private equity structure.” It will purchase and develop its initial portfolio of dairy farms without term debt borrowings by either the PDI fund or the farms, though it may take on debt to buy more properties.

(BusinessDesk)

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14 Comments

Mr Fay could be a buyer, thats if he misses out on Crafar's. Bottle of Champ's on it being a bad investment within 5 years.   Anyone still need a financial lesson?

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i bet these guys milk this investment for all that it's worth.

It might be safer to put money under the matrass

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Lol your probably right Andrew but not for the directors

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Wait for payout to drop and the unsophisticated investors crystalize their losses. Also wait for Watters and MyFarm to bleed any profitability as they look to extract every inch of 'value' from their management proposal which will reduce dividends. Then watch the farms not perform, see the share price drop significantly below NTA, buy, wait for the foreign buyout and hey presto - you've made money.

Well it worked for me with NZFSU...

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Just read the other article on th NZ $ and having been looking at farm financials of late, Id say they will make good money on the management fees.

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Its all about timing, a time to stay and a time to jump ship, a time to take a profit and a time to let someone else share the risk.

'Problems loom' for US dairy farms as output rises

http://www.agrimoney.com/news/problems-loom-for-us-dairy-farms-as-outpu…

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Oh, and note those USA production figures compared to ours,

>>>>>>

The numbers at the bottom suggest US production per cow is 844 Kg MS per
year. Compared to NZ cows at 334 Kg MS in a good year. A ratio of
2.5:1.

And up by 120 Kg MS over the last 10 years.

 

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Interesting point Andrewj. What NZ dairy farmers should be afraid of is Calfornian (production up 6.6% in Janaury 2012 - http://brownfieldagnews.com/2012/02/17/milk-production-up-3-4-in-january/) dairy producers learning how to turn milk into milk powder (WMP & SMP) and exporting into some of NZ's key markets e.g. China. Shipping from US west coast to China would be relatively cheap (back loads essentially).

 

Have a look at the Rabobank report "California Dairy : Turn West" (http://www.dairyreporter.com/Markets/Global-markets-offer-huge-dairy-export-opportunity-for-California-Rabobank) which makes some interesting points - the San Joaquin valley in California produces about the same amount of milk as NZ. The full report makes interesting reading (https://www.pressroomrabobank.com/publications/food__agri/rabobank_report__california_dairy_turn_west_.html

 

Interesting to see a senior Fonterra executive head to California late last year - how long does it take to build a few milk powder plants?

 

http://www.stuff.co.nz/business/farming/5968352/Top-Fonterra-executive-resigns\

 

http://www.progressivedairy.com/index.php?option=com_content&view=article&id=8072:new-hire-andrei-mikhalevsky&catid=109:new-hires&Itemid=158

 

 

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its not just California

>>>>

 

 The states with the highest percentage increases are Utah (+8.6%),  Colorado (+7.8%), Arizona (+7.0%), and California (+6.6%),  reflecting a combination of more cows, great weather in the western region, and a drive to produce more milk during the month.  Honorable mention goes to  Indiana (+5.8%), also with more cows and very good weather. 
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Argentina too

 

Argentine dairy shipments rose 49% to 384,000 tonnes in 2011, beating by some 40,000 tonnes a previous high, set five years before, according to Global Trade Atlas.

 

http://www.agrimoney.com/news/argentine-milk-export-surge-highlights-sa…

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True some other states are growing faster than California but their production volumes are much smaller. California is around 21% of total US production and is the largest state by far. It also has the advantage of location (close to the coast) making it easier to tap overseas markets in Asia and Latin America. So if Californian dairy companies start seeing better returns in international markets than in the US they have the ability to divert product into these markets.

 

http://www.nass.usda.gov/Publications/Todays_Reports/reports/mkpr0212.pdf

 

Most of Argentina's exports go to Brazil, Venezuela and Algeria although exports to China are growing.

 

http://www.nzxfutures.com/system/dairy_reports/reports/260/original/The%20Dairy%20Trader%202012%2002%2017.pdf?1329424389

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So Mick, you will be one of the' high net worth inividuals' wanting to jump into this offer boots and all?  

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The words "wouldn't", "touch" and "bargepole" come to mind.

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Lets look at the management fees

say they purchase a farm woth 5 million with a 170,000 kg

intial management fee $75000 and based upon $6.00 per kg

a yearly management fee of 51.000. Seems a bit to high

what do you get for that fee

accounting services, farm consultancy ?

 

 

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