As bids are weighed at the top end of town for Fonterra’s multi-billion dollar suite of assets that are on the sale block, dairy is proving to be a challenging business to be in at the other end of the market.
Maggie Beer Holdings on Friday wrote down the value of its Paris Creek farms business by $4.6m as sales revenue dropped 9.5 per cent to $14.7m, primarily driven by lower milk supply, the company said.
In an understated one liner in its results release to the ASX late last week the company said it had decided that Paris Creek was “an asset for sale’’.
Coincidentally Paris Creek’s former owner, Beston Global Food Company, also updated the markets on Monday saying that its shares would need to remain suspended from trade while it considered a non-binding offer for part or all of its major asset – its South Australian cheese and lactoferrin processing operations.
Beston bought a 26.5 per cent interest in what was then called B-d. Farm Paris Creek (the B-d denoting its biodynamic status) before listing on the ASX back in 2015.
Beston was originally set up as an investment company that bought stakes in several agricultural businesses, also getting into the rock lobster and beef game, before pulling back over the years to focus almost solely on dairy.
The company has never made a profit, and by March this year found itself with a near-$70m debt pile, and negative cashflow to the tune of $3.4m for the quarter.
The company’s banker, NAB, earlier this year tried to unload $55m of the debt it held in the company, but didn’t find any buyers.
Beston shares went into a trading halt on July 1 and quickly moved to a suspension while the company sought to sell assets in a bid to get the best outcome for shareholders, who if they got in at the initial public offer price of 35c per share are looking at an almost complete wipe-out with the shares going for 0.3c at last count.
Late on Friday Beston told the ASX that it was continuing to progress due diligence with “a major international dairy company which has provided a non-binding indicative offer relating to Beston’s core business of dairy and dairy nutrition’’.
“The discussions in relation to this proposal are ongoing subject to nondisclosure agreements and are not as yet in a form capable of acceptance,’’ Beston said.
“The board of Beston believes that these discussions, if brought to a satisfactory and material conclusion, will provide the best possible outcome for all stakeholders.
“Such a transaction is necessary for Beston’s continued financial viability.’’
The company added that in light of the potential deal, it could not satisfactorily assess the carrying value of its assets or appropriate impairment charges, and could therefore not file its full-year results.
“An Appendix 4E and financial statements will be provided as soon as possible,’’ the company said.
Beston had previously put a September 9 deadline on bids being received.
When it got out of Paris Creek in 2017 Beston relinquished convertible notes in the company and also sold it a dairy farm, which brought in $7m.
Maggie Beer, known at the time as Longtable, bought Paris Creek in late 2017 for $34m, including $30.5m in cash and $3.5m in shares.
It also paid off $7.6m in bank debt held by the dairy company.
Maggie Beer Holdings itself is now only worth about $23m, with the shares falling more than 9 per cent on Monday to be trading at 5.8c.
MBH also on Friday impaired the goodwill of its hampers division, which it paid $40m for in 2021, by $13.8m.
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