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Allied Farmers agrees to buy Speirs Finance for $5.6m

Wednesday 23rd July 2008

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Allied Farmers conditionally agreed to acquire Speirs Group's finance arm for NZ$5.6 million cash and stock, boosting assets in an industry reeling from the fallout of the global credit crunch.

Allied will issue NZ$2.5 million of new shares at NZ$1.35 apiece and stump up NZ$3 million of cash for the purchase, with NZ$2 million to be reinvested in Allied Nationwide Finance perpetual bonds, the company said in a statement. Allied stock last traded at NZ$1.27.

"The need for greater scale and improved market penetration arises from the fact that the New Zealand finance sector is currently consolidating," Speirs Group said in a separate letter to its bond holders.

Speirs Group posted a NZ$3.2 million loss last year though its Speirs Finance unit lifted its contribution to the group after a year-earlier loss. Total assets fell to NZ$262 million in the year ended March 31 from NZ$297 million, mainly reflecting a decline in loans and advances.

The transaction requires the approval of Speirs Group share and debt-holders, and also depends on the retention of the A-1+ credit rating assigned to its securisation programme by Standard & Poor's.

Funding Facility

Allied stands to benefit from access to the programme, which is supported by Bank of New Zealand with a funding commitment of NZ$150 million, Allied Nationwide Finance chief executive John Mallon said.

Speirs Group stock was unchanged at 35 cents on the NZAX market. The stock has dropped more than 40% in the past year, twice the decline of the NZAX.

After the transaction, Speirs Group will hold approximately 8.85% of the shares of Allied Farmers. It will hold NZ$2 million of Allied Nationwide perpetual bonds, initially paying annual interest of 13.16%, with a yearly reset each Sept. 30 at 4.5% above the one-year swap rate.

Speirs will have a put option to call on Allied Farmers to redeem the Bonds in five years time at face value.

After the sale, Speirs Group said it expects to remain listed on the NZAX, with investments in Speirs Nutritionals, Speirs Foods and its stocks and bonds in Allied Farmers.

Executive chairman Nelson Speirs would join the board of Allied Nationwide.

Speirs Finance provides financing for plant, machinery and business vehicles. Allied Farmers has rural merchandise, livestock advisory, real estate and non-bank finance interests.

Separately today, Speirs said it closed an offer of $20 million Perpetual Speirs Bonds, which was undersubscribed by $6,461,000.

By Jonathan Underhill

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