Delegats IPO

[rmbbrave]

Delegat's to go ahead with float
11 December 2005
By GREG NINNESS

Delegat's Group says it intends to proceed with a public float and appears almost certain to make a new bid for majority control of associate company Oyster Bay Marlborough Vineyards.


"We are going to go to the market with an IPO (initial public offer)," Delegat's chairman Robert Wilton said.

"We are going through due diligence and our investment advisers are saying we've got two years of forecasts to undertake. We will be presenting Delegat's to the market as a growth stock."

Wilton also dismissed concerns that Delegat's may have difficulty raising the money to finance a successful bid for control of Oyster Bay.

"I don't give a stuff what the brokers say," Wilton responded when told of those concerns.

"We do not do anything without having the funding in place. We have very, very strong support from the financial markets and they believe in what Delegat's has done and in what it is going to do."

Delegat's successfully fought a takeover battle for Oyster Bay with Marlborough investor Peter Yealands, winning with a bid of $4 a share.

But its takeover declared was void after a court challenge.

Yealands has said he will bid again at $4.50 a share.

The Delegat's float is unlikely to proceed until the ownership of Oyster Bay is resolved, but several aspects of Delegat's finances are likely to affect investors' appetite for shares. They include its negative cash flow of $3.4m in the year to June 30 and that it doesn't own its vineyards.

Apart from Oyster Bay, in which it is a 33% shareholder, Delegat's has sold most of its vineyards to the Australian unit trust Challenger Wine Trust, on a sale and lease-back arrangement.

Wilton said the company's negative cash flows were a result of its strong export growth, which had stretched its debtors ledger and made it necessary to increase its inventory levels.

Asked if he saw cash flow moving back into positive territory, Wilton said, "Oh yes, too right. Because what happens is your growth curve starts to taper off and what you have then is a stable debtors' ledger and a stable inventory."

He would not say when he expected that to happen. He was also confident potential investors in Delegat's would not be deterred by the fact it didn't own its vineyards because the value of the company was in its ability to produce "super-premium wines" and the strength of its brands.

"I'd love to put the brands on the balance sheet. Unfortunately I'm not able to," Wilton said.

The company's other main asset is its $70m Marlborough winery, due to be completed in time to process next year's vintage.

But Delegat's could still feel a squeeze if Oyster Bay's independent directors take a more hard-nosed approach to grape price negotiations. The struggle with Yealands has focused attention on the supply deal with Oyster Bay and tougher pricing could cut Delegat's profit by 20%.

[kura]

After they tried to shaft the OBV shareholders (withholding relevant info) then, surely their credibility would have to be questioned, would it not ?? IPO would only be beneficial to Delegat family IMHO (just look at listed ASX wine companies) the glory days of wine companies surely must have passed us now, they should have looked at listing 5 years ago.

[croesus]

My understanding is they paid less then the going rate for quality OBV grapes, if that is true, I won't partake in their float.

[rmbbrave]

Delegat's shares to be offered at $1.40 each

16.03.06 1.00pm


Delegat's Wine Estate said today it would offer 32 million shares to the public at $1.40 each as part of its long-awaited IPO.

A priority pool of shares will be reserved for Oyster Bay Marlborough Vinyard (OBMV) shareholders and to those who sold OBMV shares to Delegat's under its partial offer in January, and to Delegat's noteholders

Noteholders will be allocated 3.57 million shares worth $5 million and OBMV shareholders (excluding Delegat's) will be entitled to 30 per cent of the IPO, or 4.8 million shares.

The IPO kicked off yesterday, with an institutional book build in which shares were priced between $1.40 and $1.60 each.

A price between $1.40 and $1.60 would give Delegat's a market capitalisation of about $160 million.

The offer opens on March 27.

A float has been mooted for two years but Delegat's protracted battled to secure OBMV seriously distracted it.

Delegat's got into a bidding war with Marlborough entrepreneur Peter Yealands for OBMV, who forced Delegat's to lift its initial offer from $3.10 a share to $6.

Delegat's is New Zealand's third-largest wine exporter and has recently built a $70m winery in Marlborough.

The company is headed up by managing director Jim Delegat and his sister, Rosemari. It was founded by their immigrant parents Nikola and Vidosava in 1947.

The family is expected to cut its holding from 100 per cent to about 65 per cent.

- NZPA

[rmbbrave]

October dividend set for Delegat's
25 March 2006
By DAVID HARGREAVES

Shareholders in Delegat's Group may get their first dividend in October, projections with the winemaker's share float prospectus show.


While the projections come with qualifications as to whether they will be achieved or not, they incorporate the possibility of a payout of $1.3 million, or 1.3c a share for the year to June 30.

Delegat's is raising $45 million by selling 32 million shares at $1.40 each.

The offer opens on Monday and closes on April 13, and the shares ar elikely to list on NZX on April 21.

The offer values the company at $140 million.

Directors Jim and Rosemari Delegat will continue to hold about two-thirds of the Delegat's stock once the company lists.

The prospectus discloses that as managing director, Jim Delegat will be on a salary package of $750,000 a year, while his sister Rosemari Delegat, the executive director, will be on a package of $370,000.

Both are entitled to six months worth of redundancy compensation.

Profit projections in the prospectus show Delegat's earning $4.4 million after tax in the year to June, rising sharply to a profit of $13.8 million for the 2007 financial year.

Under a complicated formula, the Delegats have agreed to compensate new shareholders by cancelling some of their shares if the 2007 profit falls short of $13.8 million – though this has been capped at a level of $2.25 million below the projections.

Revenues are projected to rise from $58 million for the June 2005 year to $80.8 million in 2006 and $122.5 million in 2007.

The long-planned Delegat's float was delayed last year while the company was embroiled in a messy takeover bid for Oyster Bay Marlborough Vineyards.

Delegat's finally achieved majority control of Oyster Bay early this year.

The prospectus shows that the delays have had an impact. In 2004 Delegat's issued $35 million of capital notes. Under the terms of the issue, the interest rate payable on the notes would increase if the company did not have a share float by November 15, 2005.

As a result, the interest rate on the notes increased from 9.75 per cent to 11.25 per cent on that date. The rate will drop again once the float is completed.

Also in November, Delegat's signed up for up to $12 million in "bullet cash advance" facilities from Westpac.

The prospectus shows that as of December 2005 the company's average weighted interest costs on its unsecured subordinated debt was 16.83 per cent, compared with 8.61 per cent on its secured bank loans.

The $45 million to be raised from the float will go toward repaying debt and will help to support the $73 million development of the company's new Marlborough winery.

[rmbbrave]

Jim Delegat provides answers for Delegat's Group

01.04.06
By Liam Dann


Delegat's Group - which owns the popular Oyster Bay brand - unveiled plans to list on the stock exchange this week. Managing director Jim Delegat took some time out to say why the company is heading down the public path.

Why bother listing a wine company on the stock exchange? Why does the company need cash?

We've felt for a long time that Delegat's would be well suited to public listing because it's successful, it's in a business that people love to be part of and it's got great opportunities. The cash raised in the IPO is about funding the strategies driving expansion and global growth. We could have elected to stay private and not grow, but where's the fun in that?

There's been a lot of talk about timing and negative sentiment in the market. How have you found the reaction from brokers and investors?

Talk is cheap. The tangible reaction has been positive - the IPO has been on the radar for a long time and I've never had any reason to be concerned about our prospects.

Is the wine industry a high-risk investment?

Risk has many dimensions - the business you're in, your position within that business and how you run your business. We're aware of the risks we face - the largest being climate and currency - and we manage accordingly.

How much of a hassle was last year's battle (with Peter Yealands) for control of Oyster Bay Marlborough Vineyards?

It was a distraction but Delegat's had made a set of commitments to Oyster Bay when that company was floated in 1999 and we were determined to honour them.

Why did you need control? You owned the rights to the brand.

From our perspective, it wasn't about getting control because we had always been happy as a 32 per cent shareholder. Our business relationship with Oyster Bay was on a solid footing, governed by arm's length contracts and a good commercial framework that served the interests of both companies. The takeover contest was about the future of Oyster Bay. When Mr Yealands made his move, we could not be sure that he would be committed to the direction of Oyster Bay as we were. We felt we had to act.

You and your partners have offered investors a kind of personal guarantee that Delegat's will meet its prospectus target for 2007. Why?

It's not so much a guarantee as an offset - if the company doesn't meet its 2007 earnings projection the Delegat family will have some shares cancelled, increasing the other shareholders' equity in proportion to the shortfall.

We did it as a demonstration of confidence and goodwill.

What's your favourite wine at the moment?

All wine, but the choice depends on the occasion.

[Yossarian]

Does anyone know whether it is worth putting an applcation in for shares via the public pool? Most of the shares seems to be reserved already (Oyster Bay shareholders, Delegats noteholders, etc)?

[KJ]

I spoke to ABN AMRO CRAIGS today who are sending me an investment statement-they tell me that I should get some.I think that you will have to join up as a customer.

[Major von Tempsky]

Delegats was forced to buy control of OBV to stop any more of their dirty linen being aired.
They're forced to do a float to restore their cash position after the forced takeover of OBV.
You'd be joking if you saw any mileage in Delegats for ages.
Besides which don't forget Warren Buffett - he doesn't take part in going for new floats. Rightly says that generally they're at too high a price and the profit all goes to the floater.
Don't forget Mike Pero, Feltex & &.
And if you still have an unreasonable bug for Delegats, wait until after the float and the price has crashed to buy them more cheaply.
Besides which Delegats deserves to be punished for ripping off the minority investors in OBV for so many years, hiding the manipulation of OBV grape sales to Delegats, and telling so many fibs.

[rmbbrave]

I half agree.

The chances of the Delegats SP going down on opening day is too high for my liking.

However having a blanket rule on not buying in IPO's is just stupid.

Remember Vector, GFF, NZF. Each IPO should be considered on it's merits. I'm not just talking about fundamentals either but things like how much hype (misplaced or otherwise) has been generated.

MTV you're too quick to generalize - that's one of the reasons you make so many mistakes and fail to learn from them.