Scales pays US$23.2m for 60% of US petfood manufacturer

By Jenny Ruth

Dec. 14 (BusinessDesk) - Mr Apple owner Scales Corp says it has bought 60 percent of a United States-based petfood manufacturer.

Scales says it will pay US$23.2 million for the stake in Shelby JV LLC. It is buying that from founder and president Brett Frankel, who will retain the other 40 percent.

Scales already owns a petfood ingredients business, Meateor.

The transaction is unconditional except for the satisfaction of completion obligations and is scheduled to settle before the end of this month.

“Shelby operates in a sector that we know and understand well,” Scales managing director Andy Borland said in a statement.

“We are pleased and excited to be extending our existing petfood activities through this partnership with Shelby, its founder Brett Frankel, and its management team, all of which are very highly regarded in the market,” Borland said.

“Whilst undertaking our commercial due diligence, we were encouraged by the strength of the relationships that Shelby has with both its customers and suppliers and the high regard in which they hold Shelby.”

Shelby has a strong strategic alignment with the operations of Meateor and will extend the range of proteins that Meateor presently offers. It will also offer an in-market point of contact for customers shared between the two businesses, Borland said

Shelby will add about 80,000 metric tonnes of product sales to Meateor’s sales volume of about 27,000 tonnes.

Frankel said Scales is “an ideal partner to help Shelby continue to move forward as a leading independent petfood ingredients processor. We are excited to partner with the Meateor and Scales team and look forward to leveraging the opportunities available to both businesses.”

Scales chair Tim Goodacre said the acquisition demonstrates the firm's commitment to its strategy refresh. Scales had experienced strong growth in its food ingredients division, which continues to offer attractive market opportunities and financial returns that meet or exceed the firm's long-run target of a 15 percent return on capital employed.

Goodacre said the food ingredients division can replace the earnings in the medium term from the pending sale of the coldstore business.

The company is taregetting earnings before interest, tax, depreciation and amortisation of $25 million from the division in the next five years and has earmarked further funding of up to $50 million over that period to meet that target, he said.

“Meateor and the food ingredients division is and will continue to consider various acquisition and strategic growth opportunities to extend the breadth and depth of its supply base and product range in particular.”

The sale of the Polarcold Stores and Whakatu Coldstores businesses for $151.4 million was announced in May but is still awaiting Overseas Investment Office approval. The sales agreement sets the deadline for OIO approval at Feb. 9.

Earlier this month, Scales said it expects to be at the top end or to exceed guidance for ebitda of $58-65 million for calendar 2018, including earnings from the coldstore business.

Scales shares closed trading yesterday at $4.22. Year-to-date, Scales shares are down 11.7 percent compared with the NZX 50 Index’s 4.7 percent.

(BusinessDesk)

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