Two of the biggest post harvest kiwifruit operators in the Bay of Plenty are merging to create a new fully grower-owned supply cooperative.

Satara Co-operative Group Limited and EastPack Limited say their deal involves a cash and share issue.

Investor Shareholders in Satara will be offered $1.25 per share and Transactor Shareholders in Satara a 1:1 equity stake in EastPack.

The deal is subject to conditions including 75 per cent shareholder approval of each entity, consents and finance approval from respective banks, prescribed levels of grower commitment and limits to the number of shareholders of each company exercising minority buy out rights.

Post merger, all growers holding transactor shares will then have the same rights including the entitlement to future rebates, which subject to prudential requirements and EastPack's constitution is expected to remain at a level of not less than $0.20 per ‘class 1' tray supplied.

Details of the offer will be available in a prospectus and investment statement to be released in mid November. The EastPack board is also considering an issue of further EastPack Investor Shares for all shareholders in the merged organisation, the size and terms of which are still to be determined.

'We are excited that the proposed merger would mean a 100 per cent grower ownership. For some time it has been recognised that there is a natural fit between these two companies,” says Satara chairman Hendrik Pieters.
'We believe there will be financial benefits and increased efficiencies through leveraging our synergies, assets and skills within a cooperative framework.”

EastPack chairman, Ray Sharp, says EastPack and Satara were two like-minded cooperatives.

'EastPack's vision is world class, from orchard to market,” says Ray.
'To realise this vision and related merger benefits continued capital investment is required to upgrade and expand post harvest facilities.

'The merger will give growers the collective financial clout through their representatives on the EastPack board to make these longer term investment decisions today without placing short term pressure on OGRs and rebates.”

Both chairmen see a merger as enhancing competitive advantage through increased scale to optimise efficiencies and quality.
In a joint statement the chairmen agreed:

'Securing grower ownership and control of strategic supply assets also complements industry evolution and our committed support to the global success of marketer, Zespri, and continuation of the single point of entry (SPE) structure.”

EastPack CEO Tony Hawken will be the chief executive of the new merged cooperative overseeing implementation and integration. The board will have grower directors from Satara and EastPack as well as two Independent Commercial Directors. Board elections will be held in April 2011 at the annual meeting of the new entity.

The grower-owned cooperatives are aiming to have the new business up and running with integrated operations before the 2011 season following special general meetings to seek shareholder approval in early December.

Anticipated Timings

• Mid November – Amalgamation documentation mailed to shareholders
• November – Presentations and meetings with shareholders.
• Early December – Special meeting of shareholders to vote on the proposal
• 1 January 2011 Amalgamation takes effect

Background facts

EastPack: 2010 packed 16.7m Class 1 trays

For the financial year ended 31 December 2009:

• Revenue $61.2m
• Operating Profit before rebates $8.8m
• Operating profit before tax $5.3m
• Operating profit after tax $3.98m
• Sites: Opotiki, Edgecumbe, Te Puke Quarry Road

Satara: 2010 packed 8.5m Class 1 trays

For the financial year ended 31 December 2009:

• Revenue $56.6m
• Operating Profit before rebates $3.1m
• Operating Profit before tax $1.3m
• Operating Profit after tax $0.9m
• Sites: Washer Rd, Collins Lane, Griffin Rd, Marshall Rd, Totara St, Glenbervie, Poroti