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New Wine Company Launches $6 Million Public Offer

Public investors in the new Marlborough wine company, The Crossings (Marlborough) Limited, will be able to subscribe in two instalments with a minimum subscription of $5,000, the company announced today.

The public share offer opened today, to raise up to $6 million, as part of the development of a $12 million wine company, The Crossings, to capitalise on international demand for New Zealand wines.

The company intends combining two established vineyards, the Medway and Brackenfield vineyards, with a third Awatere Valley property it has bought and will develop. Together, these three vineyards will have 140 hectares or 345 acres of planted vineyard and be capable of producing 70,000 cases of premium wine a year.

The offer is for up to 6 million ordinary shares at a price of $1.00 per share, to be paid in two instalments: 50 cents on application and 50 cents on 28 February next year. The minimum subscription is $5,000 with further shares available in multiples of $1,000.

A projected dividend of 8 cents per share fully imputed is proposed from 2005, when the company reaches full production, and is equivalent to an interest return of 12 per cent per annum before tax.

“This offer gives investors the opportunity to get into a larger New Zealand-owned wine company with a strong export focus, at an early stage,” Mr Michael Millar, chief executive of Farmers’ Mutual Group, said today.

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

The offer is conditional upon $1.0 million being raised by the expected closing date, 15 December 2000.

“When production from the third vineyard comes on stream in 2004, the company plans to establish its own winery. However, during the development stage from 2001 to 2003, we plan to use contracted wine making facilities and a consultant wine maker.”

The two existing vineyards, Medway and Brackenfield were formed in 1996 and 1997 as investment partnerships. The partners have agreed to sell these vineyards to the company in exchange for shares in the new company and have applied for additional ordinary shares in the company to the value of $1.1 million.

The 108 acre Medway Vineyard is planted predominantly in Sauvignon Blanc and Chardonnay and produced its first harvest in 1998. Brackenfield, with 81 acres planted in Sauvignon Blanc and Pinot Noir, was planted in 1998 and will first produce in 2001.

The third vineyard, The Crossings, will comprise 156 acres and be planted mainly in Sauvignon Blanc and Pinot Noir.

All three vineyard sites are free draining, with 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.

The company has contracted International Wine Associates (IWA), a Californian firm specialising in global marketing and distribution, to establish marketing and distribution relationships for its 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.

“With three distinct vineyards, we have the ability to produce wines and branding that meets the specific requirements and preferences of different international markets. This enables the company to be market-led as we are not locked into an existing brand or style of wine.”

Except possibly for direct sales to 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’s 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 annual wine exports will 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 Limited, a division of the specialist rural financial services company Farmers’ Mutual Group, and Investment Services Limited, who will act as investment manager.

“The offer provides an opportunity for New Zealand 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 Michael Millar.

Copies of the Prospectus and Investment Statement can be obtained from any Farmers’ Mutual Office.


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