Less than six months after finalising its takeover of the Kraft peanut butter brand in Australia, Bega Cheese is wrapping up a $12 million purchase of Queensland’s leading peanut supplier.
Bega has secured more than 93 per cent of shares in the Kingaroy-based Peanut Company of Australia (PCA), which began life as Queensland’s Peanut Marketing Board.
It became an unlisted public company in 1992.
The takeover move, initiated last month when Bega paid $1.9m for 20pc of PCA, aims to shore up local peanut supplies for its expanding manufacturing agenda.
PCA directors unanimously recommended shareholders accept the friendly bid, having first gone through extensive discussions with the NSW South Coast-based Bega.
PCA’s own recent expansion efforts have been constrained by a lack of investment capital and financial difficulties following the limited success of an attempt to start a peanut growing and export industry in the Northern Territory.
One of PCA’s major shareholders has been the National Australia Bank (NAB).
NAB converted $31.2m of company borrowings to equity in the business in 2012-13 after seven years of PCA production efforts in the NT were abandoned in 2010 and its three Katherine district farms put up for sale.
Our plans are to increase the domestic supply of peanuts by working with farmers to expand plantings and production.
Bega, which paid $460m to buy Kraft’s Australian and New Zealand spreads and dressings business (including Vegemite) from US food giant Mondelez earlier this year, now wants to work with Kingaroy district farmers to rebuild production locally around the nation’s peanut hub.
“This means more farmers, larger crops and secure manufacturing jobs in Queensland,” said executive chairman of the diversifying dairy business, Barry Irvin.
“The PCA acquisition will help us grow the supply of Australian-grown peanuts to make peanut butter at our Port Melbourne factory and supply other PCA customers.”
“Our plans are to increase the domestic supply of peanuts by working with farmers to expand plantings and production.
“We have a long history of working with farmer suppliers in the dairy industry and we want to apply that experience to the peanut industry.”
Local product priority
He said Bega was following a trend in world retailing to source food products locally.
“We want our peanut butter and Vegemite to be hyper local – that’s what the public wants and deserves.”
The company will proceed with its full ownership plan for PCA via a compulsory acquisition of those shares it has not already bought in the past month.
It has offered $10m in an unconditional takeover bid of all remaining shares after securing its original 19.99pc.
“PCA is an important part of our strategy of creating a great Australian food company, which will include Bega peanut butter with 100pc Australian peanuts,” Mr Irvin said.
The 93-year-old PCA is chaired by Mr Irvin’s former dairy co-operative rival, Ian Langdon, who headed the big Dairy Farmers co-operative until it sold for $910m to National Foods, now Lion Dairy and Drinks, in 2008.
PCA has plants at Kingaroy and Tolga and is involved with all aspects of the peanut processing chain from developing new peanut crop varieties to drying and shelling, grading, blanching, sorting, roasting and granulating the final product.
It is one of the world’s leading exclusive processors of Hi Oleic peanuts, based on high yielding, disease resistant cultivars bred by the company.
Hi Oleic peanuts have a different oil chemistry to regular peanuts which ensures the oleic acid ratio more closely resembles that of olive oil, making the product a healthier option for consumers which also stays fresher for longer.
PCA’s Mr Langdon has paid tribute to the “enormous contribution” of his executive team led by chief executive officer, John Howard, given the company’s “significant financial challenges throughout the past decade”.
“Despite these financial constraints, the PCA team has dramatically improved processing operations, reduced costs, maintained the highest product quality and introduced a range of branded peanut products now on retailers’ shelves nationally and overseas,” he said.
“However, PCA has been severely restrained by the lack of investment capital to capitalise on the opportunities available.”
Bega chief executive officer, Paul van Heerwaarden said his company was delighted with the response from PCA shareholders, many of whom were Queensland peanut growers.
“As a proud Australian-owned company Bega has a strong history of working closely with farmers.”