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Major Development Capitalises On NZ Wine Demand

MAJOR DEVELOPMENT TO CAPITALISE ON INTERNATIONAL DEMAND FOR NEW ZEALAND WINES

A major new wine company is to be formed, to capitalise on international demand for quality New Zealand wines, based on three vineyards in the prime Awatere Valley near Blenheim. The new company, The Crossings (Marlborough) Limited, expects to have 140 hectares (345 acres) of planted vineyard and be capable of producing around 70,000 cases of wine per annum.

The company intends to purchase the existing Medway and Brackenfield Vineyards in the Awatere Valley in exchange for shares in the new company and will also develop a third Awatere vineyard (The Crossings) to produce premium wine for export markets.

The company expects to produce around 630,000 litres by 2005 putting it into the second category (200,000 – 2 million litres) of New Zealand wine producers.

“This new venture gives investors the opportunity to get into a larger New Zealand wine company with a strong export focus, at an early stage,” Mr Grant Uridge, executive manager of Farmers’ Mutual Group, said today.

“The investment also offers the partners of the Medway and Brackenfield Vineyard the opportunity to consolidate their current investment into a new venture at the value-added end of the wine industry,” according to Mr Uridge.

“By combining the current vineyards with the new property, we will have scale of operation necessary to develop our own wines and access international markets.”

The investment offer is conditional upon a majority of the Medway and Brackenfield partners endorsing the proposals on 28 July and an additional $1.4 million being raised by first allotment. An offer of up to $7.0 million in additional shares will be made to partners and a subsequent public offer for any remaining shares will be made on 21 August.

“When production from the third vineyard comes on stream in 2004, the company expects to establish its own winery. However, in the development stage and until it secures a sufficient volume of sales, we plan to use contracted wine making facilities.”

The partners of the two existing vineyard partnerships are being offered Ordinary Shares and Convertible Preference Shares in the new company or a combination of the two, in exchange for the sale of the existing vineyards to the new company.

The partners also have the opportunity to purchase additional shares in the company at a preferential rate of 90 cents per share, however there is no requirement for any partner to put in any money in addition to their existing investment.

The two existing vineyards, Medway and Brackenfield were formed in 1996 and 1997 as investment partnerships. They are now well-established and have 70 and 200 investors respectively. Medway Vineyard, comprising 44 hectares, is planted predominantly in Sauvignon Blanc and Chardonnay and produced its first harvest in 1998. Brackenfield, with 33 hectares planted in Sauvignon Blanc and Pinot Noir, will first produce in 2001. The third vineyard, The Crossings, will comprise 63 hectares planted mainly in Sauvignon Blanc and Pinot Noir.

The Awatere Valley has all the natural characteristics needed to produce top quality wines in the distinctive New Zealand style – low rainfall, the average is approximately 780 mm per annum, and high sunshine hours, between 2,100 and 2,400, which is higher than the 2,000 hour New Zealand average.

The three vineyard sites have free draining, fine soils, which produce lower vigour vines with naturally opening canopies to assist with vine balance, important for high quality grape production. While supplementary irrigation is needed during the long dry ripening periods, all three vineyards have current water rights.

Because some 90 per cent of the company’s wine is intended for export, the company has made arrangements with International Wine Associates (IWA), a Californian firm specialising in global marketing and distribution. IWA will help establish marketing and distribution relationships for the company’s wine in export markets.

The Crossing’s ability to attract a major distribution partner is enhanced by the scale of the proposed operation and the ability of the three vineyards to produce high quality wine. This enables the new company to focus on export markets and take advantage of the interest and growing demand for premium New Zealand wine

Except possibly for direct sales to its shareholders, the company does not intend to enter the domestic wine market.

Demand for ‘new world’ wine producing countries such as New Zealand, grew from 6 per cent to 17 per cent from 1992 to 1997 and demand for quality New Zealand wines is exceeding supply.

Over the decade 1989 to 1999 the New Zealand Wine Institute statistics show export volume increase of 540 per cent and 980 per cent in value. This growth has continued through 2000 and export sales in May reached $150.9 million. The Institute projects that annual wine exports will nearly double to reach $275 million by 2003.

Sir Allan Wright will chair the Board of the new company with the other directors being John Comerford, Ken Franklin, Ron Gibson, Graham Hull and Tim Herrick.

The investment promoters are Farmers’ Mutual Investment Services, a division of the specialist rural financial services company Farmers’ Mutual Group, and Investment Services Limited, who will act as investment manager.

“The Crossings provides an opportunity for investors to become involved in the value added end of New Zealand’s wine industry and benefit from growing international interest in and demand for quality New Zealand wines,” says Grant Uridge.

ENDS


For further information, please contact:
Grant Uridge Gina Kilkolly
Executive Manager
Farmers’ Mutual Group Product Officer
Farmers’ Mutual Group
Telephone: (06) 351 8882 DDI Telephone (06) 351 8920 DDI
(025) 488 689

Issued by Shandwick International on behalf of Farmers’ Mutual Group

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