By Paul McBeth
Kiwifruit grower Satara Cooperative is set to join Seeka Kiwifruit Industries under an amalgamation plan as the industry struggles to come to grips with the outbreak of Pseudomona Syringae pv actinidiae bacteria a year ago.
The deal would give Satara shareholders 1 Seeka share for every 3.14 Satara shares, and would need investors to sign off at their annual meeting in December, the companies said in a statement. The directors reached that valuation based on the illiquidity of trading and the uncertainty of earnings due to Psa.
Shares in Seeka last traded at 92 cents apiece on Nov. 8, valuing the company at $13.3 million by market capitalisation, while Satara stock last traded on July 6 at 55 cents, giving it a market cap of almost $9 million.
If the deal gets the go-ahead, Satara growers will have the option of operating under the same terms and conditions they agreed to for the 2012 packing season or take Seeka’s packing charges. From 2013 onwards, all growers will be offered the same terms, the companies said.
“The board of Satara has been conscious of preserving the capital invested in our business, and continuing to offer our growers the best possible packing charges and service,” Satara chair Hendrik Pieters said. “The board believes that the resulting financial benefits and increased efficiencies of a larger group will deliver to our growers and stakeholders a more solid proposition over the short and longer term, and, importantly, in the current Psa environment.”
The Psa bacteria was discovered at several orchards last year, prompting the government and statutory monopoly Zespri to stump up $25 million apiece in a plan to contain the spread of the vine canker. The bacteria’s spread is likely to seriously dent the $1 billion industry with affected orchards facing closure as the canker sets in.
Last year, Satara abandoned a proposed merger with Eastpack after Eastpack’s credit lines dried up after the Psa outbreak.
Seeka chairman Kim Ellis said the amalgamation will help realise surplus capacity between the two companies which should lower debt and create a strong entity.
“Fragmentation of the kiwifruit industry has long hindered rationalisation to save costs and this combination makes sense from a number of perspectives in these very uncertain times,” he said.
Seeka chief executive Michael Franks will keep his role as head of the amalgamated entity, and Satara’s Pieter will take a seat on the new company’s board.
The companies aim to have the new business up and running with integrated operations before the 2012 season.