Coca-Cola Amatil sells SPC cannery for $40m

Coca-Cola Amatil says new owners of the loss-making cannery SPC will offer jobs to all its staff.

SPC at Shepparton in Victoria. Picture: Alex Coppel

Coca-Cola Amatil has sold its loss-making Victorian fruit cannery SPC for $40 million to Shepparton Partners Collective, which says it will grow the business and offer jobs to all permanent workers.

The buyer is an investment group that also has existing exposure to agricultural businesses, as well as a broad portfolio of investments in other assets such as commercial property and retail.

The $40 million SPC will be paid on completion is a tiny fraction of the $700 million Coca-Cola Amatil paid for the fruit and vegetable processor in 2005.

The bottler said taking into account forecast working capital balances, working capital adjustments to the sale price and costs of disposal, it expected a profit on completion of the sale of between $10 million to $15 million.

Both parties are targeting a completion date before the end of June.

The sale agreement also includes a four-year deferred payment which, subject to business performance, could result in up to an additional $15 million of sale proceeds.

Due to the realisation of recognised deferred tax assets, Coca-Cola Amatil’s ability to frank dividends will be significantly impacted in the short to medium term, the company said.

Late last year the bottler announced it would sell off the struggling SPC after it continued to make losses despite almost $100 million invested into it by the company and the Victorian government.

The business was originally bought in 2005 by Coca-Cola Amatil as the beverages group sought to diversify from fizzy drinks to also buy up coffee companies and bottled water producers.

Overall, Coca-Cola Amatil said it had poured about $250 million into SPC since buying it in 2005.

The sale of SPC sent shockwaves through the Victorian regional town of Shepparton, where the fruit cannery is a major local employer, with local farmers supplying produce.

The new owners have committed to grow the Goulburn Valley-based business and offer employment to all permanent staff.

Group managing director of Coca-Cola Amatil, Alison Watkins, said Shepparton Partners Collective had the right combination of commercial experience, funding support and confidence in the future of SPC.

“This outcome is good news for SPC and good news for the Goulburn Valley,” Ms Watkins said.

Ms Watkins said there was strong domestic and international interest during the divestment process, reflecting SPC’s iconic status and the transformation of its manufacturing capacity following a $100 million co-investment between Amatil and the Victorian government.

“Shepparton Partners Collective recognises the value of SPC’s brands, the opportunities for innovation and category growth in Australia, and its export potential,” Ms Watkins said.

“Importantly, they’re also committed to offering ongoing employment to all permanent members of the SPC team.

“This ensures continued access to the world-class capability and experience in fruit and vegetable processing which is brought to the company by SPC managing director Reg Weine and his team.”

Coca-Cola Amatil said the sale doesn’t include the Perfect Fruit and LUMI brands.

Popular SPC products. Picture: AAP

Shepparton Partners Collective is a joint venture between Perma Funds Management and a finance firm called The Eights.

The team has significant Australian and international experience in food, supply chain, finance, retail, agribusiness and technology. Members of the team have previously worked with or advised Ernst and Young, Proctor & Gamble, Johnson & Johnson, Cadbury’s and Kellogg’s.

Perma’s managing director, Hussein Rifai, confirmed that all permanent staff at SPC would be offered ongoing employment.

Under the new ownership, management will be focused on reducing complexity in the business, improving the efficiency of working capital and inventory, building domestic and international channels, and product innovation.

“We are delighted to have acquired SPC, one of Australia’s most iconic businesses. We believe there is enormous opportunity to grow this unique 100-year-old brand further domestically and internationally,” Mr Rifai said.

Independent state MP for Shepparton Suzanna Sheed said Shepparton Partners Collection appeared to “saying all the right things” in terms of the continuity of the business.

“My view all along is that we’ve wanted Coca-Cola to sell it to a company that will consider the sustainability of it for our region,” Ms Sheed said.

“Not only is it important for our horticultural industry, but it employs a lot of people, and there have been many challenges over the years. In terms of the new owners, I look forward to a chance to meet with them.”

Ms Sheed said she hoped federal and state governments would do what they could to help the new owners turn SPC into a profitable business.

She said she understood Coca-Cola Amatil had fulfilled its obligations with respect to an $78m investment in the company in exchange for $22m from the then-Coalition state government in 2013.

“That was all invested as it was meant to be,” Ms Sheed said. “The deal has been honoured, just, and now it’s been sold.

“The investment did put the company in a better position, to the point that it truly is a modern factory.

“From the community’s point of view it’s just so important that SPC maintains a strong position in our community.”

Victorian Nationals leader Peter Walsh said SPC had been a major employer and an icon in the Shepparton region for more than 100 years.

“The Liberal Nationals were proud to support Shepparton’s fruit growers, SPC and the hundreds of people who work at the factory when we were in government,” Mr Walsh said.

“This included that $22 million that secured the company’s future and it also included a stack of targeted support that went directly to growers when those contract cuts hit the local industry hard in 2013.

“The most important thing from our perspective with today’s news is that Shepparton’s fruit industry and SPC continue to stay strong, productive and profitable into the future.”

Victorian regional development minister Jaclyn Symes welcomed the the sale of SPC, saying it was good news for Shepparton workers, given the new owners had committed to retain all permanent staff.

Ms Symes will this week meet with Shepparton Partners Collective to discuss their plans to grow SPC, as well as the broader implications for the Goulburn Valley.

“Our focus is on ensuring there is a strong, long-term future for SPC in the Goulburn Valley, which supports 2,700 on-farm and supply chain jobs in regional Victoria,” Ms Symes said.