Allied Farmers sells stores to Fonterra’s RD1 to pay down debt
By Paul McBeth
Aug. 3 (BusinessDesk) – Allied Farmers Ltd. will sell its rural merchandising stores to rural supplies chain RD1 Ltd. as it seeks to raise funds and repay outstanding debt from its ill-fated purchase of the Hanover and United Finance loan books in 2009.
RD1 will buy six stores and lease one of Allied Farmers’ 11 retail outlets, adding to the 57 stores it has nationwide. The price wasn’t undisclosed. The deal will be done next week once RD1 completes a Land Information Memoranda review on the stories.
Last month, Allied Farmers rural division said it planned to sell the stores, and chief executive Steve Morrison told BusinessDesk this sale will minimise the impact on staff cuts and “no centre will be losing store coverage.”
“There’s been a lot of focus on the loss of jobs and the loss of stores, and this arrangement minimises that,” Morrison said. “We looked at whether we should inject more capital and decided to do what we’ve done,”
RD1 is buying the physical stores and will offer jobs to many of the 45 Allied Farmers staff affected, it said.
“Where ever possible, we want to try and keep good rural retail staff employed in these communities,” RD1 general manager Nick Berry said in a statement. The stores “provide employment and essential services – without them, those communities would be isolated and agriculture would suffer.”
The funds raised will go into repaying debt as Allied Farmers fights to survive after giving up on its failed bid to become a major lender with the tainted Hanover assets. It says it cut total group debt by more than $50 million in the year ended June 30.
Morrison, a former Fonterra Cooperative Group executive was tapped to head the rural team in June.
“We’re going to focus on our livestock and real estate businesses,” he said.
Last month, Fonterra bought back the half-stake in RD1 it didn’t own after its Australian partner Landmark was bought by Canada’s Agrium for an undisclosed sum. Allied Farmers’ merchandising stores will join the 57 RD1 stores nationwide. PGG Wrightson Ltd. is New Zealand’s biggest rural supplies company.
RD1 said it plans to widen its store network to service Fonterra farmers across the nation.
Allied Farmers shares have plunged to 0.7 cents apiece since it acquired loan assets from Hanover and United Finance in a debt-for-equity swap at the end of 2009. It had hoped transaction would propel the company into the NZX 50 Index. Since then, the loans have lost more than three-quarters of their near $400 million value.
The company paid for the loans by issuing almost 2 billion shares to the Hanover investors.