Veritas buys half of Kiwi Pacific Foods

In a move described as "a perfect fit" with its Mad Butcher business, Veritas Investments Limited (NZX:VIL.NZ - News) has acquired a 50 per cent shareholding and joint venture interest in Kiwi Pacific Foods Limited.

Kiwi Pacific Foods is a manufacturer and supplier of meat patties for local and international markets. Burger King NZ franchise holder Antares Restaurant Group owns the other 50 per cent of Kiwi Pacific Foods.

As part of the transaction, Veritas has also acquired the management rights to manage Kiwi Pacific Foods’ operations on behalf of its shareholders.

Mad Butcher chief executive and Veritas director Michael Morton says Kiwi Pacific Foods represents a perfect fit.

"Kiwi Pacific Foods is a business that can be supported by the procurement base of the Mad Butcher business and aligns us with the iconic Burger King brand as our cornerstone client. We see good growth opportunities in export markets through the Burger King connections internationally."

Kiwi Pacific Foods owns and operates a Ministry for Primary Industry (MPI) approved meat patty production facility in Auckland employing 14 staff. It has a preferred supplier arrangement with Antares through which it has been providing meat patties to Burger King in New Zealand for nearly 20 years.

In addition, it supplies meat patties to other high profile customers in the restaurants and fast food sector in New Zealand.

The purchase price comprises three elements; $2.8 million in cash, $0.6 million of Veritas shares issued at $1.38 per share, and an earn-out calculated by reference to Kiwi Pacific Foods’ net profit before tax attributable to export sales over the three years following acquisition.

Under the earn-out, the purchase price will be increased by an amount equal to 25% of Kiwi Pacific Foods’ net profit before tax attributable to export sales in each of the three years following the acquisition.

Veritas Chairman, Mark Darrow says the $2.8 million cash component has been funded by a debt facility provided by ANZ Bank. Veritas otherwise has no further debt and expects to pay dividends in line with forecast as set out in its March 2013 investment statement.

Kiwi Pacific represents a natural addition to the Veritas group Darrow says.

"It gives us valuable production capacity in the meat sector. In the first full year of ownership, after associated acquisition costs, we expect Kiwi Pacific Foods to contribute around $0.775 million of profit before tax and around $0.55 million of net profit after tax (NPAT) to the Veritas group.

"We are particularly excited in the joint venture arrangements with Antares Restaurant Group and look forward to continuing and expanding the long standing partnership."