Thursday, August 18, 2022

Danone supply farms seek more capital

The Argyll Group of three farms and a support block with over 2000 cows in milk is seeking wholesale investors for $5 million or more.
The South Otago processing plant of Danone Nutricia is using A2 milk supply from Argyll Group to make infant formula base powder.

Equity investors are being sought for a family-owned dairy farming corporate in the Clutha valley district of South Otago, where 65% of the milk goes to Danone Nutricia for processing into infant formula base powder.

The Argyll Group of three farms and a support block with over 2000 cows in milk is seeking wholesale investors for $5 million or more, with a minimum contribution of $750,000 per investor.

The properties and the plant are about 25km up the Clutha River from Balclutha.

The farms are close to Danone’s plant but the largest, called McCallbrae’s Dairy with 376ha and 760 cows at peak, supplies Fonterra.

Total annual milk production is over 900,000 kg milksolids and last season Danone took nearly 600,000 from Argyll Dairy and Riverview Dairy on the southern river terraces to the west of Cluthavale.

The Allangrange run-off of 321ha is on the north bank of the Clutha and on Tuapeka Mouth Rd.

Argyll Group has 12 shareholder groups who are mainly family members of the original owners of the three farms.

They have been working together for 20 years and an opportunity has come up to buy about 20% of the existing shares.

The offer is not open to anyone who would require Overseas Investment Office approval.

If the offer is oversubscribed, Argyll may seek further farm development or purchase options.

A cornerstone shareholding is Craigmore Farming with 25% but it is not Craigmore that wants out.

Argyll has benefits from scale when covering overheads and compliance, feed growing, winter grazing and heifer grazing, and buying power with key suppliers and attracting talent.

The group has a very experienced operations manager, Glenn McCallum, and the board of seven directors has a representative from Craigmore and an independent, Mike Fleming.

The Argyll Dairy and Riverview farms have supplied Danone for three seasons since mid-2019 and the information memorandum comments that this supply relationship brings attractive payment terms and good milk price certainty.

Danone pays for milk quality and for A2 protein supply, and all the 600,000kg Danone supplies is now certified A2. Blending and packing of well-known brands of infant formula is done in Auckland.

More details of the offer and Argyll Group, plus a link to register interest, are on the Syndex platform and website.

Interested investors will need to sign a non-disclosure agreement before seeing the Danone supply agreement, Fleming said.

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