Lowe waives conditions for Blue Sky bid

By Chris Hutching

Friday 22nd November 2002

Blue Sky Meats chairman Barry Thomas has been successful in negotiating an increased price that Lowe Corporation of Hastings is prepared to bid for the shares in the Invercargill processor.

Lowe has raised the price from its initial bid of $4.50 a share, valuing Blue Sky at $33 million, to $5 a share, valuing the company at just over $36 million.

Lowe has also changed some of the conditions that earlier gave rise to concerns from the Takeovers Panel. They related to a proposed $2.7 million payment to 37% shareholder Horizon Meats to terminate a marketing contract. The Takeovers Panel considered whether this amounted to preferential treatment but decided it did not and gave the go ahead for the takeover to resume a couple of weeks ago.

Lowe and Horizon have also agreed to maintain the marketing contract in deference to Blue Sky concerns that termination might result in higher marketing costs.

The takeover was largely driven by Horizon's desire to cash up its shareholding and it approached Lowe Corporation earlier in the year because it felt Lowe was the obvious purchaser for those shares given its long involvement in the industry, according to chief executive Graeme Lowe.

Over the past couple of days shareholders received a letter from Lowe Corporation modifying conditions of the takeover. It will waive the earlier requirement that the takeover depends on 90% acceptance of the bid in order to allow local farmer shareholders to retain an interest should they wish. But by law the offer is still conditional on obtaining acceptances of more than 50% of the shares.

Lowe said it would work with Blue Sky Meats management and representatives of farmer shareholders to set up a "right to killing space," to preserve slaughter rights of farmers wishing to sell their shares.

Blue Sky Meats shares are traded on the unlisted share exchange used by brokers. On Wednesday a parcel worth $23,000 sold at $4.60 a share just before the announcement the bid was being lifted to $5.

In stark contrast to the other meat companies that recently reported significantly reduced profits, Blue Sky Meats under the stewardship of the canny Mr Thomas over several years recently posted an after-tax profit of $4.4 million, compared with $4.2 million last year. Revenue was also up at $95 million ($82 million last year), allowing a higher dividend of 27c a share (22c last year). It had no debt, $1.9 million in the bank and $20 million in inventory and accounts. The takeover offer has been extended to December 20.

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