The Chinese company offered $2.20 a share but after a strategic review the Blue Sky Meats directors want a 30c a share increase, having identified measures that could add $7.7 million to the bottom line by 2020.
Chairman Scott O’Donnell said the opportunities would bring the performance of the Southland meat company up to NZ industry standard and in doing so would reverse recent losses and significantly improve profitability.
Should the full strategy be implemented, Blue Sky could be making an $8.4m profit by 2020 and have a share value of $3.20.
Last year it made a $900,000 loss.
O’Donnell said should Binxi up its offer to $2.50 a share, the two largest shareholders, Lowe Corporation with 17.94% and HW Richardson Group, 14.43%, would sell.
A share price of $2.50 valued the company at just under $29m, well above an independent valuation of $1.93 to $2.21 by advisers Campbell MacPherson.
O’Donnell said a core of farmer shareholders wanted to keep the two-plant company in local ownership and the board told them they needed a commitment from existing or potential shareholders before that could be considered an option.
“If they want it to stay NZ-owned they need to rally their troops and talk to us pretty quickly.”
The strategic review identified a number of actions to improve the company’s performance but three in particular would contribute an estimated $6.9m to the bottom line.
Improving carcase yield from the current 90% to the NZ industry average of 93% would add $3.5m while lifting its chilled lamb business from less than 1% to 20%, the NZ industry average, would add $2m.
Chilled lamb was about twice as profitable as frozen.
The third action was completing the upgrade of a recently bought plant at Gore to handle beef and making it profitable.
That could add $1.4m to the bottom line.
The board urged shareholders not to accept Binxi’s offer until it had a chance to negotiate.
O’Donnell said Blue Sky and Binxi, which at 13.53% was its third largest shareholder, were on good terms and the two were talking regularly.
It expected to make a recommendation to shareholders by January 30 with Binxi’s offer expiring on February 18.
