Blue Sky Meats

Blue Sky Meats Ltd appoints marketer to board

With a view to continuing the company’s future development and growth, Chairman Graham Cooney announces the appointment of Sarah Ottrey to the Board of Southland’s Blue Sky Meats.


http://www.unlisted.co.nz/uPublic/un...cement_id=1781

How is Blue Sky Meats doing? Any issues of concern, such as industrial actions, short of animals for processing, or meat price?

Lamb prices would be the big worry at present - markets are weak with low demand in Europe and prices decreasing fast after a big spike in the last 18 months, inventories higher, exchange rates making, and supply lumpy because of weather. They usually do alright because of the plant structure/high utilisation and benefitting from increased daiying in more calf numbers, which are processed at a time usually when have little/no lambs. SSB

It looks that if you have Blue Sky Meats shares it is difficult to exit. Data from unlisted show that in the past 12 months only 67860 shares out of 11.5 million total were traded (i.e., 0.59%). At this percentage it would take 169 years for all shares be traded once. That is a big problem for shareholders who want to exit at some stage of their lives.

The lamb-killing season has finished. Does anyoune have a clue on the financial performance of Blue Sky Meats to 31 March 2013?

I guess it would be another year of loss, possible bigger than last year, which was about half a million dollars.

No trading of BSM share occurred in last 9 months. It seems nobody wants to buy the shares.

Blue Star Meats announced an after tax loss of $3,875,093 for the year ending 31 March 2013. No dividend.

Blue Sky Meats annual report and media release can be found here:

http://www.unlisted.co.nz/uPublic/un...cement_id=2214

New issuer profile has been posted:

http://www.unlisted.co.nz/uPublic/un...cement_id=2245

http://www.stuff.co.nz/southland-tim...e-light-of-day

A letter to shareholders regarding the above.

Does anyone has a clue to Bluesky Meats' business performance. I think lamb killing is close to the end this season. What was its share of the
1 million fewer lambs killed in the south island?

A large off-market transfer for Blue Sky Meats has taken place.

Annual results announced.

With an after tax profit of $1.95m and a divident of 10 cents a share, Bluesky Meats delivered normal results. It is a company better
than Sliver Ferm Farms in management. For example, senior managers at Bluesky Meats took a pay cut after the losses in last 2 years.
In contrast, the CEO of SFF has not shown a respect to shareholders. He can always blame external factors for years after years of bad
performance, and his renumeration goes only in one direction: up and up!

Acquisition of Clover Export Limited.

2015 results announced and annual report have been posted.

Proposed takeover in play. Interesting to see how it pans out. Also the fact that they've been looking for buyers so their long-term shareholders are dissatisfied?

http://www.unlisted.co.nz/uPublic/do...areholders.pdf
http://www.unlisted.co.nz/uPublic/do...er_Bluesky.pdf

An offer at $2.20, current bid $1.00, last sale $1.30, sporadic dividends, what's not to like about that $2.20 offer, eh?

Maybe potential bidding war??

http://viewer.zmags.com/publication/...8#/f5249938/10

The Shareholder meeting presentation from 20 January 2017 has been posted. Click here to view

Well, it's all called off. Due to rain, apparently. And no OIO approval by 20 March.

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Originally Posted by GTM 3442

Well, it's all called off. Due to rain, apparently. And no OIO approval by 20 March.

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Didn't really seem like a lot of time, especially as think took them a long time to get their first plant purchase through in Oamaru. But then again, have 1 plant, what is the difference to having two plants?

Record profit. Aside from all the corporate speak, shows also the benefit of throughput - up 25%. Must have declined over the years.

$25.4m for takeover might now seem cheap....

https://www.odt.co.nz/rural-life/red...ts-record-high

Certainly an incredible turn around,after years in the wilderness.
Wanting to spend $11mil of capital.?
Hopefully they will post an agm presentation, and some guidance.

Having the sale to the Chinese turned down certainly seems to have galvanized them!

Long may it continue!

Trading at a PE of 4, and around 60% of NTA. Dividend payout poor however.

Does anyone know much about this company, and why the capex/reinvestment costs are so high (they state most of it is just to maintain operations)?

Maybe the big capital expenditure is a concern,taking into account their market cap is currently under $15mil..?

The current plant capacity infrastructure at Morton Mains continues to constrain growth opportunities. However, additional throughput was still achieved, and an $11 million capital expenditure program is now underway to address constraints, increase efficiency, reduce physical hazards and improve environmental performance.

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Originally Posted by Gerald

Trading at a PE of 4, and around 60% of NTA. Dividend payout poor however.

Does anyone know much about this company, and why the capex/reinvestment costs are so high (they state most of it is just to maintain operations)?

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Probably have to look back over recent years why it is trading at PE of 4. Historically been a solid yet unspectacular performer through its history, but made losses of around $2m in 2016 & 2017, before returning to profitability the last couple of years. Turnover was circa $140m last FY, and made $3.6m net, which is a good effort but traditionally the industry runs on low-ish margins.

They've had a change of strategy, new CEO and new cornerstone (Chinese) shareholder - who at one stage made a takeover offer (at $2.20/share). There are 4 long-term main shareholders which hold circa 63%. Rest is small shareholders and would say likely farmers/suppliers - can be in the top 10 with only 60,000 shares/$80k worth.

Looks like last season they processed more lambs.....much greater efficiencies/lower cost of product. Without being privy to the figures, can see that their EU quota was well down (which is a 3-year rolling average of their share of the national production). With lamb numbers overall having decreased over the years, especially in Southland with dairy, then lower share of a declining market isn't a good place to be. Appears that they've arrested that in the time being - last annual report said that number of livestock processed was 742,000, up 25%.

A few years ago they bought an old plant in Gore, with the goal of processing beef - which I think was a bit of a lemon. Lost money, shut it down and now using for petfood. Probably only paid a couple of mil for it, now getting some revenue/benefit packing ingredients for petfood.

I wouldn't get hung up about NTA. A meat plant in the middle of nowhere in Southland wouldn't have the greatest residual value. Probably the land it sits on is the most value thing (ironically for dairying).

They say their capital expenditure programme is being funded out of cashflow. Some of it will be capital stuff, but expect some will have some payback out of it.

When the takeover was on 2-3 years ago, they stated that <1% of their production was sold chilled - which cannot stress enough that this was absolutely shocking and simply unbelievable!! (what were their sales staff doing??) Just a lost opportunity, and see they have stated some growth and looking at their latest AR would say they are up to about 9% chilled - so good progress but still some what to go. Basically doesn't cost them much more to produce - but sells at a higher price, better cashflow and missing that revenue. Back at the same time - they identified they had a yield 3% lower than the industry - again a lost opportunity, which hopefully they are addressing.

My guess is they probably had a reasonable first 6 months, but 2nd HY would be tougher - due to sales into China through February and now 2m separation rules in plant and the resulting inefficiencies through the lockdown. Expect inventory would be decreased this year, and FX would be a good tail wind.

SFF should report next week, so their result may give a little guide (apparently a pretty strong result), but their FY ended 31/12.

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Originally Posted by Sideshow Bob

Probably have to look back over recent years why it is trading at PE of 4. Historically been a solid yet unspectacular performer through its history, but made losses of around $2m in 2016 & 2017, before returning to profitability the last couple of years. Turnover was circa $140m last FY, and made $3.6m net, which is a good effort but traditionally the industry runs on low-ish margins.

They've had a change of strategy, new CEO and new cornerstone (Chinese) shareholder - who at one stage made a takeover offer (at $2.20/share). There are 4 long-term main shareholders which hold circa 63%. Rest is small shareholders and would say likely farmers/suppliers - can be in the top 10 with only 60,000 shares/$80k worth.

Looks like last season they processed more lambs.....much greater efficiencies/lower cost of product. Without being privy to the figures, can see that their EU quota was well down (which is a 3-year rolling average of their share of the national production). With lamb numbers overall having decreased over the years, especially in Southland with dairy, then lower share of a declining market isn't a good place to be. Appears that they've arrested that in the time being - last annual report said that number of livestock processed was 742,000, up 25%.

A few years ago they bought an old plant in Gore, with the goal of processing beef - which I think was a bit of a lemon. Lost money, shut it down and now using for petfood. Probably only paid a couple of mil for it, now getting some revenue/benefit packing ingredients for petfood.

I wouldn't get hung up about NTA. A meat plant in the middle of nowhere in Southland wouldn't have the greatest residual value. Probably the land it sits on is the most value thing (ironically for dairying).

They say their capital expenditure programme is being funded out of cashflow. Some of it will be capital stuff, but expect some will have some payback out of it.

When the takeover was on 2-3 years ago, they stated that <1% of their production was sold chilled - which cannot stress enough that this was absolutely shocking and simply unbelievable!! (what were their sales staff doing??) Just a lost opportunity, and see they have stated some growth and looking at their latest AR would say they are up to about 9% chilled - so good progress but still some what to go. Basically doesn't cost them much more to produce - but sells at a higher price, better cashflow and missing that revenue. Back at the same time - they identified they had a yield 3% lower than the industry - again a lost opportunity, which hopefully they are addressing.

My guess is they probably had a reasonable first 6 months, but 2nd HY would be tougher - due to sales into China through February and now 2m separation rules in plant and the resulting inefficiencies through the lockdown. Expect inventory would be decreased this year, and FX would be a good tail wind.

SFF should report next week, so their result may give a little guide (apparently a pretty strong result), but their FY ended 31/12.

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Thanks for that :)

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Originally Posted by Gerald

Thanks for that :)

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Yes thank you Sideshow Bob.

Furthermore....in terms of future (share) prospects....

Not sure on the potential for any future takeover. Binxi probably had their chance and didn't take it. In recent times they've had their own issues with their plant in Oamaru (exports to China suspended - now reinstated. Closed for a few months). Probably have some sort of relationship/influence over Chinese sales, so may not need takeover. Any further increase in Binxi SH would trigger a full takeover.

They largely failed in their foray into beef, with the purchase of the Gore plant, and then shut it down. Think the plant would have significant issues, and would need to spend some money on it. Also, at the same time Alliance is trying to expand their beef production. When it works, beef can be very profitable - but there is potentially room for a niche, well-run efficient operation to take on the bigger boys.

Otherwise the company has been around since about 1987 (I think). Shown no growth/expansion etc. Operating in a geographic area dominated by Alliance/SFF and potentially opportunities to take on the bigger boys - again as niche, operating efficient processor. It has been this for many years, having a better utilisation of their plant compared to others in the area. But seems like they have lost their way. One plus in the current environment, is if unemployment increases, may be better placed for labour - ensuring fully staffed and lower staff turnover.....

Their 2nd largest shareholder is Lowe Corp - Hawkes Bay-based renderers/skin company - so logically could be some connection/relationship there.

In terms of investing, I would be looking for them to be consistently profitable, livestock numbers on better levels (lower cost per unit), better returns out of rendering/petfoods, increasing chilled (more margin) and better operational stats (ie yield). Would also want to see the end of the capital expenditure programme and a return to dividends (given lack of growth). Shares are very illiquid, so would have to maybe wait for an entry point and be a long-term hold.

No FY result as yet - last year was the 4th of July.

Would just be interesting to see how they perform in comparison to other companies.

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Originally Posted by Sideshow Bob

No FY result as yet - last year was the 4th of July.

Would just be interesting to see how they perform in comparison to other companies.

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They've changed to end of June FY, so no result yet.....

Still waiting. Must be very soon, maybe before the end of the month??

Midday business news on RNZ yesterday. Starts around 03:25 https://www.rnz.co.nz/audio/player?audio_id=2018765915

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Originally Posted by iceman

Midday business news on RNZ yesterday. Starts around 03:25 https://www.rnz.co.nz/audio/player?audio_id=2018765915

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Thanks Iceman - well spotted.

Doesn't engender alot of confidence....

https://usx.co.nz/uploads/paperclip/...pdf?1602216037

Must have come out late Friday. Haven't had a chance to have much of a look as yet.

Can see why sneaked it out. While NPAT is marginally down on last year - 15 months rather than a 12 month period. The extra months of April-June would normally be some of their higher throughput/more profitable months I'd imagine. So hard to tell if procuring/processing more or just the addition of those months.

They champion their EBITA strategic plan gains - which is great but what would have happened without these gains?

One of the positive aspects is the capital expenditure of $8.5m, funded out of operating cashflow (and no long term debt). Hopefully are projects that generate income, rather than just cost of doing business.

CEO resigned.

BLU_Letter_to_Shareholders_Todd_Grave_20201222.pdf (usx.co.nz)

Keen to push points of difference, premium returns | Otago Daily Times Online News (odt.co.nz)

Interestingly it came out in the ODT before it was announced on the USX.

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Originally Posted by Sideshow Bob

Keen to push points of difference, premium returns | Otago Daily Times Online News (odt.co.nz)

Interestingly it came out in the ODT before it was announced on the USX.

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Going to be a busy boy.
He is currently a director of Lean Meats Ltd and Atkins Ranch Holdings Ltd, and chief executive of Atkins Ranch — a US retail-focused lamb marketer. He is also chief executive of Progressive Meats, a specialist toll processor of lamb, mutton, goat and beef in the Hawke’s Bay.

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Originally Posted by percy

Going to be a busy boy.
He is currently a director of Lean Meats Ltd and Atkins Ranch Holdings Ltd, and chief executive of Atkins Ranch — a US retail-focused lamb marketer. He is also chief executive of Progressive Meats, a specialist toll processor of lamb, mutton, goat and beef in the Hawke’s Bay.

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Would just about say he might have been headhunted. Probably smaller than Progressive and less moving parts. I wonder if Blue Sky will try to get their Gore beef plant operational again.....

Couple of weeks until they likely report.

Not a holder but from a SFF perspective, always interesting to see how other companies perform.

Not too much newsworthy, or if can read much into it.....

2021_Blue_Sky_Meats_(NZ)_Ltd_Annual_Report.pdf (usx.co.nz)

Blue_Sky_Meats_-_USX_Corporate_Action_-_2021_Dividend.pdf

Although someone liked it - actually traded today and up 10c!

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Originally Posted by Sideshow Bob

Not too much newsworthy, or if can read much into it.....

2021_Blue_Sky_Meats_(NZ)_Ltd_Annual_Report.pdf (usx.co.nz)

Blue_Sky_Meats_-_USX_Corporate_Action_-_2021_Dividend.pdf

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Seems like a well acceptable result. Holders must be happy as there have been no offers since the annual report was released !
Discl: Not holding

Hmmmm, put in a trading halt this morning.......pending announcement.

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Originally Posted by Sideshow Bob

Hmmmm, put in a trading halt this morning.......pending announcement.

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Any guesses ?

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Originally Posted by iceman

Any guesses ?

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If had to guess, then maybe Binxi were having another go at a takeover. They are the largest shareholder with just under 20% now, but tried about 4 years ago and then withdrew their offer after reviewing forecasts, and not receiving OIO approval.

They had 96% acceptances at $2.20. Microsoft Word - NXBinxi-BSM-Offer-Withdraw -310317 fin.docx (usx.co.nz)

Lowe Corp own about 18%, Richardsons own 17% and Blue Star Corp own 11% and can't see any one of these trying a takeover. After this, biggest shareholder is 1% and expect that alot of the smaller shareholders are their suppliers, looking at their share register.

Of course, all pure speculation, and no doubt will be completely wrong! ;)

Picked the takeover, just not who was the takeoverer....:sleep: And looks like completely wrong on Richardson's/Lowe's not taking over.

$3.00/share a healthy premium on the last price of $1.30.

Blu_Takeover_7_March_Announcement.pdf (usx.co.nz)

Southern Lamb Investments - Shareholdings (companiesoffice.govt.nz)

They own circa 35% of the company between them already, so should be able to get another 15%?? If Binxi got 96% at $2.00 then should get enough to get over the line at $3.00.

Looks like a good solid move! Values the company at about $35m, and can effectively get control for another $5-6m. Although may have to buy the lot, although Richardsons would have deep pockets, and already putting a substantial amount into the Invercargill CBD development. Lets see what Binxi does......

I bet you the seller with 9,000 on offer at $1.28 is absolutely stoked!! :t_up:

And to think I thought they were not worth buying at $1.30...
Wrong again...lol

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Originally Posted by percy

And to think I thought they were not worth buying at $1.30...
Wrong again...lol

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$1.30 only valued the company at $15m, but share price hasn't really gone anywhere for years and divvy's haven't been a compelling to buy in.

Blu_Takeover_Notice2.pdf (usx.co.nz)

Looks like the 3rd largest shareholder (Blue Star) is on board, giving them 46%.

Saying BSP needs an investment of $30m for capital expenditure.

Further takeover documents here:

Letter_-_Despatch_Notice.pdf (usx.co.nz)
Question #8551 - Project Citrus Tree (Sell side_Target) (usx.co.nz)

Interesting comment in one of the documents:

Participants in New Zealand’s meat processing sector, including Blue Sky, are currently experiencing very favourable trading conditions. In seven month-period to 31 January 2022, Blue Sky’s earnings before interest, tax, depreciation and amortisation (“EBITDA”) was $11,358,777 (based on unaudited management accounts).1 This represents a 1340% increase in earnings in comparison to EBITDA in the prior comparative period (being, an EBITDA loss of $(915,817) for the seven-months to 31 January 2021)

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Originally Posted by Sideshow Bob

Further takeover documents here:

Letter_-_Despatch_Notice.pdf (usx.co.nz)
Question #8551 - Project Citrus Tree (Sell side_Target) (usx.co.nz)

Interesting comment in one of the documents:

Participants in New Zealand’s meat processing sector, including Blue Sky, are currently experiencing very favourable trading conditions. In seven month-period to 31 January 2022, Blue Sky’s earnings before interest, tax, depreciation and amortisation (“EBITDA”) was $11,358,777 (based on unaudited management accounts).1 This represents a 1340% increase in earnings in comparison to EBITDA in the prior comparative period (being, an EBITDA loss of $(915,817) for the seven-months to 31 January 2021)

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That is an incredible turn around.

I believe in the New Zealand primary produce sector, but it’s so bl**dy hard to invest into. And as a Bluesky shareholder, I’m p*ssed off.
What I’ve got is Southern Lamb telling me that Bluesky is a company with a great future, which is worth a lot more than the current market valuation, and that they’re prepared to pay me well over that valuation for my shares.

All well and good. Indeed hoorah!

However the long-term intention is to take the company private by delisting from Unlisted, while what I want is to participate in this growth story.

As things stand, if I don’t sell, I’m up for my share of a $30m capital raising in an illiquid company from which I have no clear exit, with the added risk of a compulsory purchase if Southern Lamb crack the 90% threshold.

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Originally Posted by GTM 3442

I believe in the New Zealand primary produce sector, but it’s so bl**dy hard to invest into. And as a Bluesky shareholder, I’m p*ssed off.
What I’ve got is Southern Lamb telling me that Bluesky is a company with a great future, which is worth a lot more than the current market valuation, and that they’re prepared to pay me well over that valuation for my shares.

All well and good. Indeed hoorah!

However the long-term intention is to take the company private by delisting from Unlisted, while what I want is to participate in this growth story.

As things stand, if I don’t sell, I’m up for my share of a $30m capital raising in an illiquid company from which I have no clear exit, with the added risk of a compulsory purchase if Southern Lamb crack the 90% threshold.

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Possibly SFF meets all your critera;\
Multiple plants.
Diversified .ie Beef,Lamb and Venison.
Strong balance sheet . no need for further capital.
Great cash flow from operations.
Pays an excellent fully imputed dividend.
Liquidity a lot better than Blue Skies.
Trading at a huge discount to NTA.

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Originally Posted by percy

Possibly SFF meets all your critera;\
Multiple plants.
Diversified .ie Beef,Lamb and Venison.
Strong balance sheet . no need for further capital.
Great cash flow from operations.
Pays an excellent fully imputed dividend.
Liquidity a lot better than Blue Skies.
Trading at a huge discount to NTA.

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Thanks Percy.

They do indeed tick all the boxes, especially with an entry price of about 40c all those years ago - around the time of the speculation as to whether they'd be able to repay their bond issue.

And now, where else is there in the NZ primary sector to stick the Bluesky money? Apart from the usual suspects like SCL,SEK, ALF, PGW, SML & ATM of course. . .

NZ Merino looks promising, but I'm wide open to suggestions!

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Originally Posted by GTM 3442

Thanks Percy.

They do indeed tick all the boxes, especially with an entry price of about 40c all those years ago - around the time of the speculation as to whether they'd be able to repay their bond issue.

And now, where else is there in the NZ primary sector to stick the Bluesky money? Apart from the usual suspects like SCL,SEK, ALF, PGW, SML & ATM of course. . .

NZ Merino looks promising, but I'm wide open to suggestions!

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Agree NZ Merino looks interesting.
I hold a reasonable holding in SEK and a lot smaller holding in the wife's name ALF.
Sold out of SCL some time ago,but still rate them highly.
PGW appears fully priced to me and I do not hold ATM or SML.REL I no longer follow.
My largest holding is PAZ.Covid logistics have caused them huge delays,however their growth path looks very exciting.
My second largest holding is SFF.

Thanks again Percy. Much appreciated.

As I have complained before - "It's so bl**dy hard to put money into New Zealand Primary Sector".

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Originally Posted by GTM 3442

Thanks again Percy. Much appreciated.

As I have complained before - "It's so bl**dy hard to put money into New Zealand Primary Sector".

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I totally agree with you. I have a very large proportion of my portfolio in primary producers, PAZ, SFF, SEK and PGW. But my 2 biggest are on the Unlisted with the added risk of lack of liquidity and SFF, as great an investment as it has been and continues to be for me (can´t wait for the upcoming annual results announcement), also has the added complication of being a co-op. Which is a great strength for the company but an added risk & complication for none supplier SH.

Some time ago (couple of years !) I remember reading about a potential ETF type fund for primary producers in NZ, which I though was an interesting and wortwhile idea. Haven´t heard anything more about it since !
It is very disappointing for such a huge primary producer as NZ is, that we have such limited investment opportunities for retail investors.

Quote:

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Originally Posted by GTM 3442

Thanks again Percy. Much appreciated.

As I have complained before - "It's so bl**dy hard to put money into New Zealand Primary Sector".

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I totally agree with you (and Percy). I have a very large proportion of my portfolio in primary producers, PAZ, SFF, SEK and PGW. But my 2 biggest are on the Unlisted with the added risk of lack of liquidity and SFF, as great an investment as it has been and continues to be for me (can´t wait for the upcoming annual results announcement), also has the added complication of being a co-op. Which is a great strength for the company but an added risk & complication for none supplier SH.

Some time ago (couple of years !) I remember reading about a potential ETF type fund for primary producers in NZ, which I though was an interesting and wortwhile idea. Haven´t heard anything more about it since !
It is very disappointing for such a huge primary producer as NZ is, that we have such limited investment opportunities for retail investors.

SLI makes official bid for Blue Sky Meats | Otago Daily Times Online News (odt.co.nz)

The $30m for capital expenditure is interesting. Board don't think a capital raise is required - is this a bit of a scare tactic?? No mention about what it is for, growth or for BAU. Single plant, single species operator, where is the growth going to come from? More chilled? More further processing? Higher throughputs? They dipped their toe in the water for beef and failed - while the plant they bought was a dog (or more accurately a horse), it would have been a good longer term play due to beef margins, but would have needed capital expenditure.

No reponse/news on what Binxi are going to do - the largest shareholder with crica 19.8%. Got 96% acceptances (so must have included Lowe and O'Donnell) at I think $2.20/share - but backed out based on forecasts and lack of OIO approval.

I think they're only after 50.1%, so if they can do that, I don't think they'll be too concerned about what Binxi might do or want.

Looking at the share register, I reckon there'll be quite a few small shareholders who'll want out - and those little shareholdings will probably get them over the line.

After that, there'll be a capital raising and maybe that's when Binxi have to do their deciding.

https://i.stuff.co.nz/business/farmi...ny-expert-says

USX announcement - 30 3 22

They have 50.35% so the offer is now unconditional.

Further from the company.

Question #8551 - Project Citrus Tree (Sell side_Target) (usx.co.nz)

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For the reasons set out in the “Factors for Shareholder to Consider” section of this Target Company Statement, the Independent Committee considers that there is a reasonable prospect that Southern Lamb will acquire between 50.35% (acceptances as at 30 March 2022) and 80.16% of the Blue Sky Shares under the Offer. If this occurs, Southern Lamb will be the controlling shareholder, but will not be entitled to compulsorily acquire the remaining Blue Sky Shares.

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So Binxi aren't selling out then.

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The Takeovers Code requires the Independent Committee (being the directors who have been delegated the responsibility to respond to the Offer by the Board) to recommend that shareholders either “accept” or “reject” the Offer or include a statement that the Independent Committee does not make or is unable to make a recommendation (and the reasons for this).

The Independent Committee considers that Southern Lamb’s Offer price of $3.00 per Blue Sky Share undervalues Blue Sky. It is below the Independent Adviser’s assessed value range for the Blue Sky Shares of $3.12 to $3.67 per share.1 It is also below the Independent Adviser’s assessed net tangible asset value of $3.15 per Blue Sky Share. On a standalone basis, these valuation factors would tend towards the Independent Committee recommending that shareholders reject the Offer

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Offer is well over double the pre-takeover share price but still says it under-values the company.

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Strong global demand is currently resulting in record pricing for New Zealand meat products and significantly enhanced revenue for participants in the New Zealand meat processing sector. As a result, Blue Sky is currently experiencing very favourable trading conditions. In the eight months to 28 February 2022 (being the latest month for which Blue Sky has completed management accounts), Blue Sky’s unaudited earnings before interest, tax, depreciation and amortisation (“EBITDA”) was $15,156,187, compared with EBITDA of $1,257,823 for the eight months to 28 February 2021.

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Good performance, and perhaps put SFF result a little into context. With 11-odd million shares on offer, pretty grunty return.

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The Independent Adviser’s Report estimates that, as at 31 March 2022, Blue Sky has adjusted net tangible assets of $36,258,000. This equates to adjusted net tangible assets of $3.15 per Blue Sky Share.2 The Offer price is below this value.

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Yeah but......what is a meat plant in the boonies in Southland realistically worth?? Land value? + Consent value?? $3.2m goodwill in there also......almost $0.30/share.

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n mid-2021, Blue Sky received a confidential, non-binding indicative proposal from a potential bidder who was considering making a full takeover offer for Blue Sky at $2.50 per Blue Sky Share. The proposal was conditional on Blue Sky providing due diligence access to the potential bidder and the shareholders associated with Blue Sky Directors (i.e. Binxi, Lowe and Richardsons) providing commitments to accept the offer.

After confidential feedback from Binxi, Lowe and Richardsons that they would not accept a $2.50 per share price, the Board declined to provide due diligence access and the proposal did not proceed.

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Interesting......may have help prompt Lowe/O'Connell?

Document points out the $2.50 was before the current financial year, and while a 20% premium with their takeover, had a pretty grunty year-to-date.

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Having regard to the matters set out in this “Factors for Shareholders to Consider” section (including, in particular, paragraph 13.3) the Independent Committee believes that Southern Lamb’s Offer price of $3.00 Blue Sky Share undervalues the company and does not adequately compensate you for the current and potential future benefits of ownership of Blue Sky Shares.

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Unconditional already, so they have control.....

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While it is possible that a competing proposal could emerge, it is important for shareholders to be aware that the Offer is unconditional and, as of 30 March 2022, Southern Lamb had received acceptances for 50.35% of the Blue Sky Shares. This means that no competing offer or competing proposal could be implemented unless Southern Lamb supported that proposal. As a result, the Independent Committee considers that it is unlikely that a competing offer or competing proposal will be made during the Offer period.

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Quote:

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7.2 Binxi holds 19.84% of the total Blue Sky Shares. Binxi has advised the Independent Committee that: (a) Binxi’s present intention is to not accept the Offer. (b) Binxi’s present intention is based on its parent company’s circumstances in China and is unrelated to the terms of the Offer. (c) Binxi does not anticipate its present intention changing and, if it does change, it will be driven by a change in circumstances with Binxi’s parent company rather than any change in the terms of the Offer.

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Quote:

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At a shareholding of 75% or greater, Southern Lamb will have the effective control described in paragraph 9.1(a) and will also be able to pass a special resolution by itself. This would allow Southern Lamb to, amongst other things, approve a major transaction or changes to the Blue Sky constitution.

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Quote:

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Southern Lamb has stated in the Offer Document that Blue Sky’s business and material assets will not be materially changed other than the need to fund capital expenditure of $30 million

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Quote:

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Southern Lamb has stated in the Offer Document that if there are a “small number of shareholders” remaining after the Offer, it intends to cease quotation of Blue Sky Shares on the USX trading platform. Southern Lamb has not specified what constitutes a “small number”. The cessation of quotation of Blue Sky Shares does not require shareholder approval.

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Quote:

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After waiting 12 months from the completion of the Offer, Southern Lamb is entitled to acquire an additional 5% shareholding in Blue Sky in each 12-month period, by way of on-market (if Blue Sky Shares remain quoted on USX) and off-market transactions, under the “creep” provisions of the Takeovers Code. There are no pricing restrictions on these transactions.

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Quote:

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on 22 March 2022 Hikanui Investments Limited (an associate of Blue Sky Chief Executive Officer Jim Goodall) accepted the Offer for 58,667 Blue Sky Shares

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Not bad, most of these sold by Lowe/Richardsons at $1.35 each in August 2021 and buying them back for $3.00.

Quote:

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Under the employment arrangements between Blue Sky and Jim Goodall, Blue Sky’s Chief Executive Officer dated 25 February 2021, Mr Goodall was entitled to an agreed number of Blue Sky Shares over a four year period. On 7 March 2022, Blue Sky and Mr Goodall agreed that this entitlement would be satisfied by a cash payment of $125,000 (gross), rather than in Blue Sky Shares.

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Quote:

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Southern Lamb has indicated that, if the Offer is successful, it may require Blue Sky to undertake a $30 million pro rata offer of new shares to shareholders to fund $30 million of capital expenditure.

The Independent Committee does not believe this statement to be misleading, but notes the following for clarity:
(a) the projected financial scenario provided to the Independent Adviser contemplates $38 million of capital expenditure over a five-year period. This is the same as the $30 million referred to by Southern Lamb in the Offer Document, except that it has been adjusted for inflation; and
(b) the nature (cashflow, equity and/or debt) and extent of the required funding for capital expenditure is influenced by various factors, including future earnings/free cash flow, the timing of capital expenditure, the timing and extent of dividend payments, and view of the postOffer Blue Sky Board as to optimal capital structure.

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From Campbell McPherson report,

EBITDA for the FY expected to be over $20m.

Quote:

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In our opinion there is a moderate to high degree of risk associated with BSM being able to achieve and maintain the projected financial scenario. However, at the projected level of BSM profitability, the Company would be in a strong position to fund key capital expenditure requirements / plant upgrades in order to future proof the business and also generate strong free cash flow following the completion of the proposed $38 million capital expenditure programme (which comprises multiple projects over a number of years as opposed to a single project).

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The Offer price of $3.00 per Share provides an opportunity for those shareholders wishing to exit their investment in the Company to do so at a significant premium to the last traded price on the USX market (prior to the Offer) of $1.30 per Share.

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We note that historically BSM Shares have been highly illiquid, and the completion of the Offer may result in a substantial reduction in the free float of available shares which may further exacerbate the lack of liquidity in the stock in the future. This would be further impacted by any decision by SLI to delist the Company from the USX following the completion of the Offer[/quote]

Quote:

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Our assessed valuation range for BSM is $3.12 to $3.67 per Share, as set out in Section 6. This valuation range represents our view on the value of 100% of the Company, and we would not expect minority parcels of Shares to trade within this value range in the absence of a full takeover offer.

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Key factors driving the increase in BSM’s financial performance in recent years include:
- Increased livestock volumes, up from 595,000 units in FY18 to 803,000 units in FY21.A further increase is projected for FY22 (i.e. 863,000 units – as discussed below). This reflects significant improvements in BSM’s procurement model.
- Increased revenue and gross margin per carcass, reflecting a combination of improved production efficiencies, increased sales of chilled products and strong market pricing.

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Total capital expenditure over the forecast period of $38 million, including:
¾ A heat recovery / energy strategy initiatives (a shift towards a reduced reliance on coal) – FY22 / FY23.
¾ Carcass spray chilling technology (FY23).
¾ A boning room expansion (FY23).
¾ Cold storage expansion / refrigeration upgrades (FY23 / FY24).
¾ A new boning room (FY25 / FY26).

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Some will have a good return ie spray chill (can't believe don't have already!! But I guess they never actually use to do much chilled in the past anyway.....

Quote:

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For the purpose of assessing the value of BSM, Campbell MacPherson has adopted a WACC ranging from 13.0% to 14.5%.

In order to calculate the equity value of BSM, Campbell MacPherson has deducted net debt of $7.51 million from our assessed enterprise value.

Using the DCF methodology and the assumptions set out above, Campbell MacPherson has assessed the enterprise value of BSM to be in the range of $43.51 million to $49.84 million.

After allowing for BSM’s projected net debt position, Campbell MacPherson’s has assessed the value of 100% of BSM’s ordinary equity to be in the range of $36.00 million to $42.33 million. This is equivalent to $3.12 to $3.67 per share (with a mid-point of $3.40 per share).

The reported implied EBITDA multiples for the three BSM transactions range from 6.0x to 6.7x. We note that the most recent implied EBITDA multiple of 6.7x in 2016 associated with the NZ Binxi takeover offer (which ultimately did not proceed), was based on assumed sustainable EBITDA (as opposed to historical EBITDA).

As summarised above, the projected book value of BSM adjusted net tangible assets as at 31 March 2022 is $36.3 million, which equates to $3.15 per Share.

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An interesting read. They have control, Binxi are staying as a minority, unlikely to see any competing offer. So just down to how much of the company they get.....

Thanks for this summary SB. Not a shareholder but heavily into SFF so this reading was of great interest. This certainly is an industry going gangbusters at the moment.
I wonder if the fact that Blue Sky will now delist, will have any effect on SFF and potentially create more interest.

Bluesky was always a second fiddle to SFF in the portfolio, although a decade or so ago, Bluesky seemed to have better prospects with the doubt around SFF's ability to repay their bonds.

Positions have reversed since, but only after the infusion of capital into SFF.

But I have enough SFF to not want to over-concentrate. And I'm not sure that the good times will keep rolling.

I'm in the happy position of starting at a low entry price - 40c - so the dividend yield on my holding is fantastic. I think there are probably a few in the same position.

Quote:

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Originally Posted by GTM 3442

Bluesky was always a second fiddle to SFF in the portfolio, although a decade or so ago, Bluesky seemed to have better prospects with the doubt around SFF's ability to repay their bonds.

Positions have reversed since, but only after the infusion of capital into SFF.

But I have enough SFF to not want to over-concentrate. And I'm not sure that the good times will keep rolling.

I'm in the happy position of starting at a low entry price - 40c - so the dividend yield on my holding is fantastic. I think there are probably a few in the same position.

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Your divie on 6th May of 12.9 cents fully imputed, will mean your current yield, on your 40 cents cost, is an incredible 31.25%...Well done.
"Not sure the good times will keep on rolling".Well the industry insiders making the Bluesky take over certainly think they will.
Not only a lot of capital up front from them, but a commitment for a great deal more.Interestingly the talk of another $30mil is half of what SFF spent last year on capex, out of their huge operating cash flow.With the Chinese coming on board, they have their capital raise well behind them,and their modest debt stands them in a very strong position.
The Coop off course has no debt and either $23mil or $28 mil in the rainy day fund.[enough for a decent divie for the next two years].

Quote:

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Thanks for this summary SB. Not a shareholder but heavily into SFF so this reading was of great interest. This certainly is an industry going gangbusters at the moment.
I wonder if the fact that Blue Sky will now delist, will have any effect on SFF and potentially create more interest.

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Yes, it is clear all players are having a purple patch with procurement and market pricing.

Not clear if they will delist from the USX, or not. But with Southern Lamb having 50%+, and then Binxi with 19.?%, then maximum of 30% remaining and any remaining holders have just rebuffed $3.00.

Quote:

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Originally Posted by GTM 3442

Bluesky was always a second fiddle to SFF in the portfolio, although a decade or so ago, Bluesky seemed to have better prospects with the doubt around SFF's ability to repay their bonds.

Positions have reversed since, but only after the infusion of capital into SFF.

But I have enough SFF to not want to over-concentrate. And I'm not sure that the good times will keep rolling.

I'm in the happy position of starting at a low entry price - 40c - so the dividend yield on my holding is fantastic. I think there are probably a few in the same position.

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While always have been a bigger company, SFF was a cot-case there for a while, primarily from the hangover of the price for Richmond. The lifting of the debt noose has done wonders, and while in a better place, should not under-estimate strong/record prices for many products. Great that some of this pricing has migrated to the bottom line. Difficult to make money when markets going the other way.

Blue Sky turn over <1/10th of SFF and is forecast to make >$20m EBITDA this year - so perhaps SFF's performance isn't quite so good in terms of a percentage margin. But over $100m net must be a record for a meat company in NZ, and much has been salted away/invested in CapEx. However there is something to be said for a single plant operator, without a large corporate structure.

I'm also not convinced the good times will continue. They rarely do!! Eg, if there is an issue with China and exports stop, then it equates to about $3/Kg off lamb schedules.

The rise in SFF may mean that some here have an over-concentration in SFF (eh Percy!), having bought at modest pricing. But even excluding the most recent FY, and go back to previous years earnings, PE is still around 5. Net assets >$3 per share.

I'm just still a little perplexed about the Gore plant. Clearly a bit of a lemon and would have needed a decent spend, but they only operated it for 1 season I think and sold it for a couple of mil. Would have thought there would have been a place for an small, cost-efficent beef processor in the area. Beef margins are pretty good at the moment, and CEO would have had beef processing experience. They process Bobby's, so have relationships with dairy farmers for supply.

Offer not reasonable, report says | Otago Daily Times Online News (odt.co.nz)

55.4%, only grinding their way upwards.....

USX_announcement_-_8_4_22.pdf

Just trickling in:

USX_announcement_-_11_4_22.pdf

[quote]Blue Sky advises that on 8 April 2022 Southern Lamb notified the Independent Committee that Southern Lamb has received acceptances for 56.79% of the Blue Sky shares.[/unquote]

I see there is a bif for 71,000 at $1.89

Everyone loves an optimist!! :eek2::glare:

Blue Sky advises that on 13 April 2022 Southern Lamb provided a second notification to the Independent Committee that Southern Lamb has received acceptances for 59.27% of the Blue Sky shares.

USX_announcement__2_-_13_4_22.pdf

At this stage, looks like still a reasonable portion that aren't selling into the takeover.

Only a few more acceptances.....just over 60% and offer closes 6th of May. In 9 days only got about 1% or about 115k acceptances.

USX_announcement__2_-_22_4_22.docx.pdf

I see the officer's been a bit backdated.

https://www.odt.co.nz/business/diffe...eover-blue-sky

68.84% now

USX_announcement_-_3_5_22.docx.pdf

Someone doesn't want to take 3 bucks....

5,000 on the offer at $3.40!

83 shareholders holding out.....

USX_announcement_-_6_5_22.pdf

Southern Lamb Investments Limited’s full takeover offer for all of the shares in Blue Sky Meats (N.Z.) Limited (USX: BLU) closed at 11.59pm on 6 May 2022 with valid acceptances received for 74.87% of the Blue Sky shares.

Accordingly, the Independent Committee advises that:
• Once all acceptances have been processed and the offer price paid to shareholders, Blue Sky shares will be held as follows:
o Southern Lamb Investments Limited: 74.87%
o NZ Binxi (Oamaru) Foods Limited: 19.84%
o 72 other shareholders: 5.29%

• At the date of this announcement, Blue Sky remains a “code company” for the purposes of the Takeovers Code

Board Updated:

Blue_Sky_Meats_(NZ)_Ltd__-_Shareholder_Update.pdf (usx.co.nz)

https://usx.co.nz/uploads/paperclip/...pdf?1654205894

Delisting.

No surprises there.

Delisted today.....