Friday 30th April 2021
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New Zealand Rural Land Company has entered into conditional agreements with Van Leeuwen Group and associated entities (VLG) and their major lender to acquire fourteen large scale dairy assets in South Canterbury and North Otago totalling approximately 6,350 hectares.
Under the transaction NZL will acquire 14 dairy assets for an aggregate purchase price of $114M (subject to final adjustments). NZL has also entered 3 separate lease agreements for the 14 dairy assets that will take effect on settlement of the transaction and have an aggregate annual rental of $5.796M.
Over the past four months NZL has, through its Manager, undertaken extensive due diligence on these assets and the incoming tenants. NZL considers that, based on its due diligence, the acquisition represents an attractive purchase.
On 20 April 2021, receivers (Calibre Partners) were appointed to the vendor by its lenders. The receivers were quoted by the NBR (National Business Review) on 23 April 2021 as saying that “The business itself has strong ebitda” - “it’s obviously got some capital structure issues”. NZL believes the transaction announced today solves those capital structure issues.
The Farms and Tenants
The farms are a mixture of seasonal supply pastoral dairy farms, hybrid grass based grazing and cut and carry winter barn farms, and dairy support blocks. The farms will be leased to three New Zealand based farming groups:
• 3 farms will be leased to Sustainable Grass Dairy Limited.
• 5 farms will be leased to Performance Dairy Limited.
• 6 farms will be leased to Performance Livestock Limited.
The three tenant entities will at settlement satisfy NZL’s criteria for tenants. The leases each have an initial term of 11 years with two 12 year rights of renewal.
The transaction will be financed using a combination of cash on hand (approximately $70.00M) and the balance in new debt. NZL has obtained terms for this debt from Rabobank and is working through conditions precedent and documentation to enable drawdown at settlement.
Settlement of this transaction (and the previously announced Southland dairy farm acquisition) will see NZL temporarily exceed its internal debt policy of 30% of total assets (anticipated to be approximately 40%). NZL will look to restore its debt level in line with its policy once further work is completed on its short term capital requirements. NZL has a comprehensive pipeline of rural land acquisitions it is investigating - spanning dairy, viticulture and electricity generation. These opportunities should see NZL gain further scale throughout 2021.
Please see the links below for details:
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