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Canada's Cervus Equipment expands kiwi footprint in C$4.9M deal

Thursday 26th July 2012

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Canada's Cervus Equipment Corp plans to shell out C$4.9 million in cash and shares to buy five John Deere dealerships in New Zealand and take full ownership of the local operation it already controls.

The Calgary, Alberta-based company has signed purchase and sales agreements to snap up Bayquip Agricultural's three branches and Fieldpower Northland's two dealerships, Cervus said in a statement. The Canadian also entered into a memorandum of understanding to buy the 40 percent of Agriturf it doesn't already own, which it plans to rebrand under its own flag. The deal is expected to close in the third quarter of this year, and is estimated to cost some C$2.4 million in cash and C$2.5 million in shares.

"Cervus continues to see improvement in Agriturf's operations and is confident in its ability to generate value," chief executive Graham Drake said. "We intend to acquire the remaining interest in Agriturf to optimise Cervus' New Zealand operations, especially given our plans for further growth."

The acquisition would almost double Cervus' footprint in New Zealand with Agriturf's existing six John Deere dealerships through the central and lower North Island. Bayquip's branches are in Gisborne, Te Puke and Tauranga, while Fieldpower has dealerships in Whangarei and Waipapa.

Cervus bought into Agriturf in 2010 for C$2.74 million, with expectations the business would generate some NZ$45 million in annual sales. Agriturf reported revenue of NZ$32.5 million in the 12 months ended Nov. 30, and posted a loss of NZ$871,000, according to financial statements lodged with the Companies Office.

The Canadian company holds interests in 52 agricultural, industrial, commercial and transport equipment dealerships across Canada, New Zealand and Australia.

Cervus' shares rose 0.1 percent to C$18.71 on the Toronto Stock Exchange yesterday, and have climbed 27 percent this year. The stock is rated an average 'outperform' according to the consensus of nine analysts' recommendations compiled by Reuters, with a mean target price of C$21.47.

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