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Timing Right for $40 million Dairy Investment

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Timing Right for $40 million Dairy Industry Investment

Zelan Pastoral Limited (“Zelan”) is a new company that has been established to provide a convenient and simple vehicle for private and institutional investors to participate in the strengthening New Zealand dairy industry. This will be achieved initially through the purchase of three established South Island dairy farms that will be leased to proven operators. Zelan is raising $40 million by way of a share placement to investors with minimum parcels of $500,000.

The present shareholders of Zelan are Rick Monk of Murchison and Ian Stuart of Perth. Mr. Monk is an experienced dairy farmer, establishing and farming Mt. Ella Station in Murchison as a large dairy farm, while Mr. Stuart has a rural background and connections to the New Zealand dairy industry. Two independent directors have been appointed to Zelan’s board in addition to Mr. Monk and Mr. Stuart. Owen Jennings, former Chairman of Federated Farmers, Member of Parliament and dairy farmer has been appointed Chairman of Zelan. He is joined by Ray Polson, a prominent company director and formerly a Chartered Accountant of Christchurch and Dunedin.

Mr. Jennings comments that “Zelan will allow investors with smaller resources to invest in dairy farmland which historically has shown excellent longer term capital growth, averaging in excess of 10% per annum over the past 20 years.”


Mr. Monk believes that “the present rise in demand and the positive long-term prospects for dairy products will underpin the future of New Zealand’s major export earning business.”

Zelan currently holds options to purchase three large dairy properties, and aims to purchase these farms with nil or low debt levels. Zelan will invest in dairying real estate as opposed to day-to-day farming operations, thereby reducing investment volatility.

In the longer term, Zelan will seek to acquire further dairy farm properties, which will be funded almost entirely by shareholder funds.

Castlemain Capital Limited of Christchurch has been appointed to lead manage the share placement, and one of its directors, Alister Bull, has commented that the key features of the Zelan opportunity are:

·        There is a rising demand for food internationally.

·        New Zealand is a world leader in efficient dairy production.

·        The dairy industry is New Zealand’s largest export earner.

·        Zelan will have strong equity levels with virtually no debt.

·        Zelan has an experienced board of directors and managers

·        Projected gross internal rate of return (IRR) of over 11% per annum

·        The properties to be purchased are quality South Island dairy farms, with strong lessees in place.

·        The farms have been purchased at levels well below the prices prevailing in 2008 and 2009. Average purchase price of farms equates to $28.34 per kg milk solids

·        The farms have good growth prospects

·        Zelan will have independently audited accounts and shareholder reporting.

·        Exceptionally strong investment security in Zelan backed by quality New Zealand dairy farm real estate.

·        Zelan intends to acquire further farms in the longer-term to increase its asset base.

CRT Real Estate Limited has been appointed as lead real estate agents by Zelan and Peter Gale from CRT Real Estate notes that there has already been strong “pent-up demand” for this type of opportunity. He further commented “Many clients can see the long-term benefits in investing in the dairy sector. The initial returns will be sound, and the perceived risk is low given that this is virtually a debt free investment in quality pastoral land, with arguably some strong upside over the next few years. Fonterra’s recent payout increase and bullish comments regarding future payouts certainly lend weight to this sentiment.”

The share offer will close in late June 2010, and at this stage Castlemain advise that there is strong interest in the proposal. Zelan will accept over-subscriptions and have targeted another proven dairy farm to purchase.



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