If a proposed alliance between Bonlac Foods and the New Zealand Dairy Board is approved by Bonlac shareholders in February, the foods company is confident that its debt levels can witness a substantial improvement.
Under the terms of the agreement, Bonlac stands to gain a cash injection of A$80m from the NZ Dairy Board, just part of an investment worth A$260m to give the board a 25% stake in the foods company and create a 50:50 joint venture company to sell popular products from both groups, including the Bega and Mainland brands.
At a series of weekend briefings, Bill Hill, chairman of Bonlac, told shareholders that this is the first time that they can gauge an actual idea of the value of their investment and that he is confident that they will be able to make the most of that value if the deal goes ahead.
“Realistically,” he commented, “only an alliance with the NZDB, which has an ideal strategic fit with our company in both the international and domestic markets, can offer this level of benefit to Bonlac farmers.”
Annual savings of over A$30m can also be expected from the merger, which together with A$60m to be retained from reduced borrowing, means that Bonlac’s debt will fall from the A$515m reported this July to below A$300m.
With all these advantage in mind, shareholders are expected to vote positively on the proposed alliance.
