Mad Butcher heads for NZX

18:18, Dec 20 2012

Butchery chain The Mad Butcher could almost double its number of franchises around New Zealand and even move into Australia if an NZX capital-raising in the new year is successful.

NZX-listed shell company Veritas said it had signed an agreement to buy The Mad Butcher for $40 million in what will end up being a "back-door" sharemarket listing when Veritas undertakes a public capital- raising in March next year.

Veritas will acquire The Mad Butcher franchisor business from owner Michael Morton for $40m, made up of $20m in cash and $20m in Veritas shares, making him chief executive, board member and the largest shareholder.

Morton bought the company from founder and original Mad Butcher Sir Peter Leitch, who is his father-in-law, in 2007.

Leitch said he had been informed a deal might be imminent but was "not a financial guy" and was only a brand ambassador for the company these days.

"I don't know anything about the sharemarket . . . but it's great to know that the little business I started has grown to a point where mums and dads can invest in it," he said.


Morton said he was very excited about the opportunity to extend The Mad Butcher's 36 stores from Whangarei to Dunedin.

"We've identified 34 new sites in New Zealand and we believe there's an opportunity for 34 more stores, and we believe we'll do six very aggressively in the first six months of trading."

The brand had been registered in Australia and a move there might be considered in future.

Morton believed potential investors would be surprised by the size and scope of The Mad Butcher when the company's books were eventually opened to the public.

"They'll be surprised when they see the numbers - what it turns over, the number of customers we serve on a weekly basis, the scope to grow it and how we can leverage off the things we already do for other things in the future."

Veritas chairman Mark Darrow said that The Mad Butcher ticked all the boxes for Veritas' shareholders investment and "was actually quite an incredible business".

"Its beauty is its simplicity: it's got a good scale, it's been well run, it's a very strong cashflow business, it's been very robust through the GFC, and importantly it's got growth opportunities."

He said those growth opportunities could be both "in meat or outside of meat".

"Collectively the group retails more than $150m [in revenue] and so it's a good scale, and the procurement base is a big strength of the company that provides leverage opportunities for doing [other] things around The Mad Butcher."

Alongside Morton on Veritas' board are former Whitcoulls, Bendon and Noel Leeming chief executive Stefan Preston, and Phil Newland, former director of Abano Healthcare, Pacific Retail Group and Gen-i, and current director of Les Mills Holdings.

Former 42 Below vodka executive Shane McKillen will also sit on the board alongside Collins Asset Management managing director Tim Cook and chairman Darrow.

Craigs Investment Partners is assisting in the marketing of the capital-raising to institutional and retail investors, which is expected to take place in March.