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UPDATE: NZ dairy manufacturer plans to list on ASX

UPDATE: NZ dairy manufacturer plans to list on ASX to raise up to A$20M for expansion
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By Tina Morrison

March 16 (BusinessDesk) - The owners of a South Island dairy manufacturer plan to list their company on the Australian Securities Exchange, raising as much as A$20 million to expand.

Australian-based Keytone Dairy Corp, whose New Zealand Keytone Enterprises (NZ) unit manufactures and exports dairy and nutrition blended products to Asia from its Christchurch factory, is offering to sell half the company to raise between A$15 million and A$20 million ahead of a listing on the ASX in May.

Keytone Enterprises is 49 percent owned by New York-based investor Bergen Asset Management's Long Hill Capital, with the remaining stake owned by the couple who founded the business, managing director James Gong, and chief operating officer Vivienne Cheung. None of the investors will be selling their shares as part of the offering and their holdings will be subject to a two-year escrow period, the company said.

Keytone built a state-of-the-art dry powder facility in Sockburn in 2013, where it blends and packages milk powder, sheep milk powder, kiwifruit milk powder and lactoferrin under its own brands as well as manufacturing a range of powdered dairy products for supermarkets and other customers under their own private label brands. The company last year bought two adjacent sites in the Izone Industrial Park in Rolleston where it plans to build new manufacturing facilities enabling it to expand into new products and markets.

“The ASX listing will assist Keytone Dairy to grow and expand," said Gong, who has a 27-year history in the dairy industry. "The company has purchased land for two new manufacturing facilities it plans to build. Once completed, the first facility will enable Keytone Dairy to expand into a number of new products with increased capacity realised through the addition of new powder blending and packing lines.

“We believe that demand for these new products will be satisfied by Keytone Dairy’s existing customers. By expanding its capacity to manufacture powdered products, it is expected that Keytone Dairy will gain access to high-volume customers in China and other Asian countries.”

New Zealand is the world's eighth-largest milk producing country and accounts for 3 percent of global milk production. While it produces a similar amount of milk to other comparable countries such as the UK and France, its small population means most production is exported. Farmers control about 85 percent of the industry through cooperatives, although the country has attracted a wide range of global investors in the dairy industry over the past 15 years since deregulation, and Chinese investors have been particularly active amid increased demand in Asia's largest economy and after the two countries signed a free-trade agreement in 2008, according to a government guide to the industry published last year.

Keytone Dairy was today meeting with investors in Auckland and expects to lodge a prospectus with the Australian Securities and Investments Commission in the first week of April, ahead of a bookbuild later that month. Its investor roadshow will include Singapore and Hong Kong, as well as major cities in Australia.

The company chose a listing in Australia over New Zealand because its key shareholder was already familiar with the ASX market and saw more opportunity for tapping investors in Australia, said Australian-based chair Bernard Kavanagh, who has previously held executive roles at Warrnambool Cheese and Butter Factory Co.

Its cornerstone investor Bergen Asset Management invests in high-growth public and private companies around the world, with a particular emphasis on small-cap public markets outside of the US. It's headed by Auckland University graduate Eugene Tablis and has an office based in Sydney.

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