PEP hatches a plan to move into NZ poultry

Pacific Equity Partners is already very familiar with the poultry product sector. Picture: AFP

Australian private equity firm Pacific Equity Partners is believed to be lining up for the $400m-plus New Zealand egg producer Mainland Poultry, also known as Zeagold Foods, which is up for sale through Luminis Partners.

The business may not hit the market until next year, but suitors are already thinking about how to do a deal.

Adding support no doubt is the recent earnings result of listed poultry producer Inghams, which hit all its targets, sending its shares soaring, as investors bet on stronger demand for more affordable protein against a weaker economic backdrop.

Navis purchased the Zeagold business, then known as Mainland Poultry, in 2017 for $NZ350m.

At the time, Adamantem Capital was the underbidder, so it may line up again.

Mainland Poultry is believed to be making over $NZ45m ($42m) in annual earnings before interest, tax, depreciation and amortisation, after building more farms.

Mainland Poultry is based in Dunedin and sells Zeagold Quality Eggs.

Its founders retain a holding.

Back in 2017 it had more than 1.2 million birds across seven farms, along with a feed division known as MainFeeds.

The eggs division, known as Zeagold, markets eggs in supermarkets through the Farmer Brown and Woodland brands.

It is also a leading egg supplier to the food service sector.

The company is unlikely to face any major competition, with New Zealand’s strict rules to prevent the outbreak of disease restricting egg imports.

The challenge for the sector has been that egg producers are transitioning away from battery cage farming.

It’s now banned in New Zealand, a move that last year created a shortage of eggs in the country and caused the price to hit about $NZ12 a dozen.

They now cost about $NZ8, compared to about $5.60 in Australia.

But while prices have been high, the changes have also been accompanied with larger capital costs for the farmers.

Pacific Equity Partners is very familiar with the poultry product sector, having once owned New Zealand poultry producer Tegel Foods, which was sold to Affinity Equity Partners in 2011 for $463m, equating to about 7 times its earnings.

The Growth Fund’s M&J Chickens – a smaller business than Mainland Poultry – is also expected to hit the block, as the private equity firm exits most of its investments.

Miles Advisory is working on a lot of the sales on behalf of The Growth Fund.