Dairy Trust half way to target of acquiring Open Country

Tuesday 9th September 2008

Dairy Trust is half way to its goal of acquiring the rest of Open Country Cheese Co. in a transaction aimed at challenging the milk industry dominance of Fonterra Cooperative Group.

Dairy Trust has received acceptances for 9,698,006 shares, representing 25.74% of the shares in Open Country, it said in a statement. In July, it offered NZ$2.75 a share for the 47.6% of Open Country that it didn't already own as part of a deal with Singapore-based agricultural products distributor Olam International.

Dairy Trust plans to help develop dairy processing facilities in the country's four major milk-producing regions, targeting capacity of 1.2 billion litres of milk.

The company is currently 44% owned by meat processor AFFCO Holdings Ltd. After the transaction, AFFCO's stake will reduce to 35.5%, Olam would become second-largest and Talley Group third with 17%.

Shares of Open Country trade on the Unlisted market. It last changed hands on August 25 at NZ$2.73. The shares are offered at NZ$2.70 and bid at just NZ$2.15.

The deal would give Olam a cornerstone holding in Dairy Trust, which is poised to become New Zealand's second-largest dairy processor, Olam said in a statement in July. Olam would also enter into a long-term marketing agreement for an escalating percentage of Dairy Trust's production, it said.

Fonterra, the world's largest diary products exporter, processes more than 90% of milk produced in New Zealand, and Dairy Trust is the only rival with plans to compete in milk processing on a national scale, the companies said.

By Jonathan Underhill

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