Eric Watson to milk US market

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Multi-millionaire Eric Watson is about to create a US$400 million (NZ$531m) dairy company in the United States, using Kiwi farming practices, including grass-fed cows.

The new company expects to halve the costs of an average US dairy farm and grab a chunk of the fresh milk market on the country's eastern seaboard.

The new company wants to raise up to US$150m for the initial roll-out of the dairy business.

Milk processing in the US is a US$50 billion industry worth US$100b at retail level.

Mr Watson is worth an estimated NZ$288m according to a British media rich list out earlier this year, after the Hanover Finance co-owner lost nearly half his wealth. His New York Stock Exchange-listed (NYSE) Triplecrown Acquisition Corp has votes in the bag to create the US$400m US-listed dairy company.

Mr Watson's Cullen Agricultural Holdings Corp and a subsidiary agritech company were expected to get the green light at a special meeting in New York overnight to merge the Triplecrown special purpose acquisition company he chairs with his Cullen Agricultural company. It is intended to relist it on the NYSE under the Cullen name. The move comes on Triplecrown's deadline to buy an acquisition or be wound up.

The company told the US Securities and Exchange Commission (SEC) it had looked at more than 200 potential acquisitions.

A notice filed with the SEC says Triplecrown negotiated to buy the shares of eight stockholders for US$38.5m who otherwise would have voted against the proposed merger.

It also did an agreement with a Watson-linked company, Victory Park Capital Advisors for it to buy US$50m-US$100m of stock, paving the way for the proposal to proceed.

It follows a trial in the past two years of the pastoral system adapted from New Zealand methods on a 40.4 hectare farm in the state of Georgia.

Cullen Agricultural Technologies, a subsidiary of the Cullen holding company has identified 16,187 ha in and around Georgia for the rollout.

An investors' presentation filed at the SEC says between Boston in the north of the eastern seaboard to New Orleans in the south 181.8 million litres of milk is transported in from the west of the country every month worth around US$60m.

The new dairy company hopes to capture a sizeable chunk of this market over time with systems used in New Zealand's dairy industry, including free-ranging cows fed on pasture instead of grain.

In the US a majority of the country's 10 million cows are restricted to living on concrete pads or in barns.

The business aims to cut operating costs by up to 50 per cent by producing leaner, high milk producing cows commanding quality premium prices because of their grass diet. Costs will be saved because 80 per cent of the cow diet is from a low cost, renewable pasture resource.

Dairy cows grazing outside every day of the year live longer because they have more exercise (seven to eight years compared to four to five years for cows kept mostly indoors).

Cullen Agricultural Technologies signed a strategic co-operation agreement in August with New Zealand Agritech Inc, a New Zealand industry body for companies selling agricultural enabling technologies, including seeds, electric fences, milking machines, weighing scales, animal health products and genetics.

The agreement will enable a fast track roll-out and commercialisation of New Zealand pasture technology on the US farms being bought with the help of a US$150m capital raising.

- © Fairfax NZ News