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Thread: Blue Sky Meats

  1. #61
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    Quote Originally Posted by GTM 3442 View Post
    Thanks again Percy. Much appreciated.

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

  2. #62
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    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.

  3. #63
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    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.

  4. #64
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    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.

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  6. #66
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    USX announcement - 30 3 22

    They have 50.35% so the offer is now unconditional.

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    Further from the company.

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

    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.
    So Binxi aren't selling out then.

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

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

    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.
    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.

    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.
    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.

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

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

    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.
    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.
    From Campbell McPherson report,

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

    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).
    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.
    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]

    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.
    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.
    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).
    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.....

    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.
    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.....
    Last edited by Sideshow Bob; 02-04-2022 at 01:40 PM.

  8. #68
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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.

  9. #69
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    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.

  10. #70
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    Quote Originally Posted by GTM 3442 View Post
    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.
    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].
    Last edited by percy; 03-04-2022 at 08:44 AM.

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