Thursday 7th March 2019
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Indicative bids to buy Tip Top ice-cream from Fonterra Cooperative Group are due in by Monday, according to the Australian Financial Review which says it has seen a copy of the confidential information memorandum.
Its Street Talk column says the business is being pitched by First NZ Capital as a “unique opportunity to invest in an iconic New Zealand company with 80 years of heritage.”
While the memorandum talks about Tip Top’s “unrivalled market position,” it also notes that Unilever, which has the rights to Magnum ice-cream and a host of dairy free products, dominates the premium end of the market where the fat margins are.
It says Tip Top’s sales this year will be about $150 million, with earnings before interest, tax, depreciation and amortisation of $20-25 million this year, rising to $30 million next year.
It lists BGH capital, Quadrant Private Equity, Pacific Equity Partners and trade buyer R&R Ice-Cream which bought Australia’s Peters Ice-Cream brand from PEP in 2014.
“Adamantem Capital, which was set up by a pair of former PEP dealmakers, is in and around the auction, as is Navis Capital, which is no doubt wondering how it can use its connections in Asia to grow Tip Top’s footprint,” the AFR says.
The Australian newspaper has also named Australian packaging billionaire Raphael Geminder and Kiwi billionaire Graeme Hart as potential Tip Top buyers.
After Fonterra posted its first ever full-year loss last September after writing down the value of its Beingmate investment and settling with Danone over the August 2013 contamination scare, it has said it will sell assets no longer deemed core, including the Tip Top business.
The AFR suggests buyers may be worried about what local farmers and other Kiwis will think if Tip Top is sold to a foreign owner.
Fonterra has told investors to expect an update on the sale on March 20 when it is due to post its first-half results.
Fonterra shares, which can be owned only by farmers, are trading at $4.50, up 9 cents from yesterday, while units in the Fonterra Shareholders’ Fund, which anyone can own, are at $4.52, up 11 cents, and have fallen about 25 percent in the last 12 months.
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