Affinity-owned Tegel gains on trading debut after $205m IPO

Tegel sold 192.8 million shares at NZ$1.55 apiece, the bottom end of the indicative range, through a dual offering in New Zealand and Australia. It equates to a market capitalization of NZ$551.7 million. The offer included 9.7 million shares held by existing shareholders. Affinity held an 87.4% interest in Tegel ahead of the offering - and agreed to retain at least 45% - while ICG had 9.2%.

In addition to receiving NZ$15 million of the IPO proceeds through share sales, existing investors were due NZ$129.6-163 million for their redeemable shares on the condition that a portion - in Affinity's case, enough to maintain a 45% shareholding - was re-invested in Tegel. A further NZ$131.9 million was earmarked to pay down debt. The company's debt load is projected to fall from NZ$251.9 million for the 12 months ended April 2016 to NZ$120 million the following year.

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.

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. 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 2016 financial year.

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• Topics
• Australasia
• IPO
• Consumer
• Affinity Equity Partners
• Exit
• Intermediate Capital Asia Pacific
• New Zealand
• Australia