Affinity-owned Tegel to raise up to $332m in dual offering

The company will sell between 137.5 million and 192.4 million shares at NZ$1.55-2.50 apiece, according to a prospectus. The offering will comprise 127.8-182.7 million new shares and 9.7 million existing shares. Affinity, which currently has an 87.4% stake in the business, has agreed to maintain a holding of at least 45%. ICG has a 9.2% interest in the business, while the balance is held by management.

Should Tegel offload the minimum permitted number of shares at the top end of the indicative price range, the company would have a market capitalization of NZ$636.3 million. Of the NZ$344.4 million in total proceeds, NZ$24.3 million would go to the selling shareholders, NZ$163 million would be used to acquire redeemable shares (on the understanding that those shareholders will subscribe to shares of equivalent value in the IPO), and NZ$131.9 million would go towards paying down debt.

Affinity agreed to buy Tegel in 2010 at a valuation of NZ$605 million. The business was majority-owned by Pacific Equity Partners (PEP), which had acquired it in late 2005 through a carve-out from Heinz, paying a reported NZ$250 million. In 2008, funds managed by ANZ Capital, investment company Lujeta, and Tegel management bought a 47% stake, with PEP selling 44% and ICG offloading the rest. According to AVCJ Research, ICG made another investment in Tegel in 2011, likely tied to the Affinity acquisition.

Founded in 1961, Tegel is responsible for about half of New Zealand's poultry and manufactures a range of other processed meat products, including sausages, for which it is the country's second-largest producer. Poultry volume came to 80,000 tons in the 2015 financial year, up from 69,000 tons in 2013, while revenue rose from NZ$418 million to NZ$484 million over the same period. For 2016, volume and revenue are expected to reach 86,000 tons and NZ$507 million, respectively.

The company commenced exports to the Pacific Islands in 2003, Hong Kong in 2006 and Australia in 2009. It reported 13,000 tons in poultry export volume in 2015 and is targeting 16,000 tons for the current financial year. Export revenue is projected to rise from NZ$88 million to NZ$103 million.

Tegel generated NZ$61.1 million in pro forma EBITDA in 2015, up from NZ$52.2 million the previous year. It is targeting NZ$75 million for the 2016 financial year. The company attributes this growth to ongoing capital investment in manufacturing processes and systems, with more than NZ$70 million injected into the business since 2013.

Overall revenue came to NZ$562.6 million in 2015, up 8.8% year-on-year, while net profit dropped from NZ$14.1 million to NZ$8.7 million, with the fall blamed on tax changes and pro forma adjustments. The company expects to achieve a net profit of NZ$9.9 million in the current financial year.

First NZ Capital Securities, Deutsche Bank and Goldman Sachs are managing the offering.

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• Topics
• Australasia
• IPO
• Consumer
• New Zealand
• Exit
• Affinity Equity Partners
• Australia