Uncertainty over Psa Outbreak Undermines Merger

Media Release 2 December 2010

Uncertainty over Implications of Psa Outbreak Undermines EastPack-Satara Merger

EastPack Chairman Ray Sharp said that as a result of the uncertainty over the long term impact of the Psa bacteria outbreak on the kiwifruit industry and a possible future reduction in crop volumes, it was concluded that the proposed merger of the two Bay of Plenty post harvest operators should not proceed.

“Given the current uncertainties it was unwise to go ahead with the deal at this time,” Mr Sharp said. “The prudent approach at present is to preserve the capital base and make sure that the resources are there to support growers. Taking on more debt to pay out Satara's investor shareholders is not good stewardship of our growers’ investments.”

The proposed merger, announced just before the discovery of the kiwifruit bacteria, would have created the leading, fully grower owned co-operative if it won 75 per cent support from the shareholders of each entity.

“We are very disappointed as a lot of time and resources have been invested into the merger, but at all times we have to act in the best interest of our grower shareholders,” Mr Sharp said.

“Psa has undermined our confidence in the metrics on which the merger was approved and made it very difficult for EastPack to accurately forecast future volumes and financial projections in the proposed capital raising prospectus."

He said that EastPack has suggested to Satara Directors that once the long term effects of Psa are known that fresh opportunities that are mutually beneficial to grower shareholders may be able to be explored.
Mr Sharp said that EastPack, a top industry financial and operational performer, is due to report its full year results early in 2011 and was currently tracking ahead of budget with profit before tax and rebates expected to be up 10 per cent on prior year at around $9 million. It aimed to pay a full year rebate to transactor shareholders of 25 cents per tray supplied and up to 14 cents per share dividend to investor shareholders. This will allow EastPack to retain significant earnings to further consolidate its financial position, Mr Sharp said.

Directors have agreed to pay another 10 cents per tray rebate this month, bringing the total to 20 cents per tray for the 2010 harvest. The decision to pay the remaining 5 cents per tray rebate and any dividend is dependent on the Directors’ review of the long term outlook for the business.

“We are in good shape and we aim to stay that way,” the Chairman said. “We have a strong and healthy balance sheet, sound assets which we will retain and the nous to exercise financial prudence because no one knows the long term implications of Psa at this point.”

EastPack, the second biggest integrated post harvest operator in the country and leading handler of GOLD kiwifruit, has had 23 of its supply orchards affected by Psa. To date three of those orchards, including two which supply EastPack with around 100,000 trays, have had a large proportion, or their entire orchard vines, removed.

ENDS

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