Allied Farmers will exercise its call option on the 50% of New Zealand Rural Land Management Company its does not own, at an independent valuation of $8.3 million.
The call option was written into the formation of NZRLM two years ago, when Allied Farmers paid $2.5m for the first 50%.
The independent valuation was made by PwC and is binding on all parties.
The five vendor shareholders are Clyde and Rena Holland with 20%, Elevation Capital Management with 16.5%, RPMilsom Investments 1.5%, Hopeton Trustee Company 6% and Richard Milsom 6%.
Allied Farmers chair Christopher Swasbrook is a founding shareholder of Elevation and co-founder of the listed NZ Rural Land Company (NZL), and Richard Milsom is an Elevation executive and co-founder of NZL.
Allied’s independent directors, Philip Luscombe and Shelley Ruha, now have to determine the optimum manner for the NZRLM acquisition, being a mix of cash, borrowings and sale of Allied’s NZL shares.
Because Allied does not propose to raise more capital for the NZRLM purchase, or issue any new shares, shareholder approval is not required.
NZRLM is the external manager of NZL, which has grown quickly since its initial public offering a little over two years ago, now with total assets approaching $300m and net assets of $191m on December 31.
The interim results for Allied Farmers for the 2023 financial year were reported last week, along with the NZRLM purchase proposal.
The unaudited net profit before tax was $2.1m, up 46% on the six months ended December 31, 2021.
The NZRLM contribution was $412,000 and subsidiary NZ Farmers Livestock made $2m, its best interim result of the past six years.
Swasbrook said no dividend will be paid as the Allied board believes retaining and redeploying earnings is in the shareholders’ best interests at this time.
Earnings of Farmers Livestock, in which Allied has a majority shareholding, were driven by a strong veal-processing spring campaign. While livestock agency performance was affected by the weather, grass and market conditions, it is still slightly ahead of the interim result from the previous corresponding period.
