Sale of Fiji Dairy Limited

Source: http://www.thejetnewspaper.com/subpages.php?ID=1655#.UDZyycHiZ_Y

The Prime Minister and Minister for Finance today a at a signing ceremony executed the Agreement for Sale and Purchase of shares in Fiji Diary Ltd (FDL) to Southern Cross Foods Ltd (SC Foods).

"This is the culmination of a long process undertaken by my Government to revitalise and modernize the diary industry in Fiji," the Prime Minister said. "The industry has been riddled with problems as such mismanagement, corruption, inefficiency, and outdated infrastructure and technology."  

"Now with the participation of the private sector, in this case SC Foods, we will, through various initiatives by them and concomitant incentives by Government, focus on increasing local production and capacity."

"SC Foods shares Government's vision to encourage domestic milk production and work toward self-sufficiency in order to reduce Fiji's reliance on imported dairy products," the Prime Minister said. "At the moment the industry is meeting less than 15% of Fiji's liquid milk demand of 70-80 million litres per annum."

In 2010, Government supported and provided funds for the restructure of the Rewa Cooperative Dairy Company Limited (RCDCL).

The restructure sought separation between the processing and supply functions, in order enhance the efficient operation of the dairy business. The RCDCL was re-organised into FDL, as the processing company, and Fiji Cooperative Dairy Company Limited (FCDCL), as the farmers/suppliers cooperative company.

The primary conditions of sale are: that FDL, under SC Foods, will, at least for the next 10 years, purchase all the milk produced by FCDCL; that FCDCL will in turn sell all its milk to FDL; that the 20% Class B shares in FDL held by the farmers will not be diluted; and that concessionary duty rates will be provided to FDL to ensure growth in local production.

SC Foods, in purchasing FDL, will take over the company's liabilities, currently at $17 million. On top of taking over the debt of FDL, SC Foods will pay a minimum of $10 million for the purchase of the shares from Government.

Furthermore, as part of the conditions subsequent, SC Foods will by 31 December 2012 commence work on a 350 acre dairy farm in Waidina involving a minimum of 150 cows. It will also, within 4 months of settlement, install two chilling centres in the Western Division and within 3 years upgrade and modernise the plant and machinery at the existing factory. These conditions subsequent will need to be carried out to the reasonable satisfaction of Government.

As part of the Sale and Purchase Agreement Government has obtained a guarantee of $2 million from SC Foods and its directors in their personal right, which will be recovered by Government in the event the conditions subsequent are not met.

The Prime Minister said, "Government through all its ministries and agencies will assist the private sector in meeting this short fall and focus on providing direct assistance to farmers by way of providing improved animal husbandry accessibility, improved herd quality to increase milk production and improved feed quality at competitive pricing."

The expected date of settlement of the sale is 30 August 2012.