Tuesday, 07 June 2016 08:55

LIC eyes partial float

Written by  Sudesh Kissun
LIC chair Murray King. LIC chair Murray King.

Farmer cooperative LIC is likely to seperate into two entities before the end of this year.

A proposal from the LIC board and management is being put to shareholders this week: to split LIC into a genetics company and an agritech company by December 1.

The genetics company will remain a 100% farmer-owned co-op; the agritech company may call on key investors to raise capital next year, subject to shareholder approval.

LIC chairman Murray King told Rural News no shareholder vote will be required to split the company into two; LIC's technology and animal husbandry business units will be offloaded to LIC Automation, already operating as a subsidiary.

However, a 75% 'yes' vote will be required to make constitutional changes to allow new shareholders into the agritech company.

King says another roadshow will be held next year before shareholders vote for changes to the LIC constitution.

LIC's board and shareholders have been talking about capital structure changes for two years. A diversified shareholder base of farm owners, sharemilkers and farm equity partners has given rise to tension within the co-op.

"The ambiguity of the existing capital structure creates tension between the interests of classes of shareholders and farmer customers; this was a hindrance to the delivery of strategy," says King.

During a shareholder roadshow last year a wide range of expectations was discovered among shareholders: some wanted returns via dividends, others preferred growth in share value, most wanted new and innovative products and services.

King says it was clear all shareholders wanted "cows in calf to quality genetics, and information to manage herd and farm. And some wanted us to stick to our core business of genetics and not to go into non-mainstream businesses like technology."

LIC sees great opportunity for the intellectual property it has developed, but funding is needed to develop and grow the automation and sensing business.

King says a lot of global companies have expressed interest in working with LIC on the agritech company.

"We know, given the current environment, there is little appetite among shareholders for investing in agritech. But every business needs to grow; if we don't keep moving we will get behind."

King says while LIC has a small international business, it has mostly relied on the 11,000 farmers in New Zealand to make money.

The agritech company will allow it to tap into the strong market opportunity offshore without exposing farmer shareholders to direct risk.

LIC capital structure shake-up

• A herd improvement co-op 100% owned by farmers

• An agritech company that will allow outside shareholders and capital subject to shareholder approval

• Separate businesses to operate by December 1, 2016

• Shareholder roadshows to discuss board proposal

• Board will give update at the annual meeting in October.

More like this

Featured

Horticulture exports hit $8.4B, surge toward $10B by 2029

A brilliant result and great news for growers and regional economies. That's how horticulture sector leaders are describing the news that sector exports for the year ended June 30 will reach $8.4 billion - an increase of 19% on last year and is forecast to hit close to $10 billion in 2029.

National

Machinery & Products

Calf feeding boost

Advantage Plastics says it is revolutionising calf meal storage and handling, making farm life easier, safer, and more efficient this…

JD's precision essentials

Farmers across New Zealand are renowned for their productivity and efficiency, always wanting to do more with less, while getting…

» Latest Print Issues Online

The Hound

Be afraid

OPINION: Your old mate hears some of the recent uptick in farmer confidence has slipped since the political polls started…

Trust us!

OPINION: Ther'es a reason politicians rank even lower than John Campbell in the most trusted profession surveys.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter