Rural Equities to supply Synlait

Last updated 11:41 25/06/2013

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Farm-owning group Rural Equities says it will start supplying milk to Synlait Milk from two of its Canterbury farms this season, though it will continue to supply Fonterra from other dairy farms in its portfolio.

The group owns six dairy farms and recently conducted a review of the options for processing the milk from those farms. It has sold about half its shareholding in Fonterra.

Rural Equities executive chairman David Cushing said in a statement the Canterbury farms, Milford and Rocklea, would supply Synlait Milk in the season which started on June 1.

The milk would be able to be supplied to Synlait without owning Synlait shares.

Synlait yesterday announced a $120 million offer of shares to the public to build new facilities and speed up its growth.

Rural Equities would continue to supply the Fonterra Co-operative from Delorain farm in Taranaki, Penshurst in the Manawatu, and the two Southland dairy farms of Shenstone and Tatarepo.

After the recent Fonterra bonus share issue Rural Equities owned 1.59 million Fonterra shares.

The group also participated in the recent Fonterra shareholders' supply offer which enabled a proportion of shares to be sold to the Fonterra Shareholders' Fund with the suppliers retaining full rights to supply milk.

Both this and the Synlait initiative had enabled Rural Equities to divest about half of its Fonterra shareholding, amounting to 789,262 shares sold. This sale had realised about $6m, at an average price of more than $7.50 a share.

Cushing said that after a direct approach from a neighbour Rural Equities had entered into an unconditional contract for the sale of the Blairmore property in Central Otago.

The sale proceeds would be $3.45m, representing a premium of 7 per cent to the June 30, 2012, independent market valuation.

Blairmore had been owned by the group for more than 24 years, but was geographically isolated from its other properties. Settlement would be in the first half of 2014.

"The directors are pleased with Rural Equities' progress. The sale of the Fonterra shares and the Central Otago property will result in total proceeds of $9.4m and will further strengthen Rural Equities' financial position," Cushing said.

Rural Equities is New Zealand's only publicly traded rural land-ownership company with $192m of assets in a diversified portfolio of 27 rural properties, and was spun out of North Island- based Williams & Kettle in a reconstruction in 2004.

Rural Equities shares are traded on the Unlisted exchange and last changed hands at $3.45.

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