GROCERY MERGER

Dominion, Volume 23, Issue 80, 28 December 1929, Page 12

GROCERY MERGER

LONDON STORES DEAL COMBINATION OF INTERESTS According to a London cable message of December 20, an important grocery merger has been registered iu the name of Allied Supplies, Limited, with a capital of £451,800, to acquire the tea packing and blending undertakings of the Home and Colonial Stores, Liptons, .Maypole Dairy Company, Meadow Dairy Company, and Pearks Dairies. It is also authorised to deal in butter, cheese, eggs, and provisions. The basis on which the merger has been effected as far as the shareholders of the companies mentioned are concerned is not stated, but the deal is obviously a further development of amalgamation processes that have been working for more than twelve months. As long ago as March 2 of this year the ‘Economist,” under the heading, “A Mysterious ‘Stores’ Deal,” dealt at some length with the “acquisition” of the Meadow Dairy by the Home and Colonial Stores. Both, said the “Economist,” are old-estab-lished and highly-prolltable concerns in the multiple food and provision trades, dating from 1901 and 1888 respectively. Both have been prominent in connection with recent developments in these trades, the Home and Colonial having, in 1924, obtained a substantial interest in the May pole Dairy Company, while the Meadow Dairy has lately been associated with Liptons in a working agreement designed to retrieve the earning power of that famous but unfortunate company. The Home and Colonial, at the beginning of last week, February 23, had an issued capital of £2,400,000, inclusive, of £1,000,000 in £1 ordinary shares, which received 25 per <?ent. in dividends and bonus in respect of 1928.' The Meadow Dairy’s paid-up capital is £1,413,625, including £187,875 in 1/preferred ordinary and £375,750 in 1/ordinary shares, both of which for the last complete year (1927) received 30 per cent. An Effective Combination. Early in February the Meadow Dairy approached the Home and Colonial with “suggestions for an effective combination of interests,” and so rapidly did the negotiations progress that in less than a fortnight the Home and Colonial Company s secretary was able to issue a notice, with the annual report, of various resolutions designed to give practical effect to an agreement between the two companies. The meeting was held on February 21, and, an independent motion for an adjournment being lost, it was resolved to split the existing £1 ordinary into five 4/- shares, and to increase the authorised capital by 3,000,000 new 4/- ordinary ranking pari passu, except that 775,000 of these shares were to carry ten times the voting power of the remaining ordinary shares. On the Meadow Dairy side it would appear that certain individual shareholders have contracted to sell 1,596,156 preferred and 4,873,051 ordinary shares —representing approximately 42} per cent, and 65 per cent, of the outstanding total in each class respectively—to the Home and Colonial, on the basis of 5 Home and Colonial 4/- shares for every 21 preferred, and 5 for every 18 ordinary in the Meadow Dairy, the latter's shares being transferred cum a final dividend (which is apparently to be 20 per cent.), while the Home and Colonial shares given in exchange are to be ex the final dividend and bonus of 17} per cent. “The first point which strikes the outside observer is the relatively unfavourable nature of the terms offered to the Meadow Dairy shareholders. On the basis of present dividends, every holder of 21 preferred shares who makes the exchange will, in addition to losing his final dividend for 1928, receive only 5/- in dividends in succeeding years, as against 6/3.6 d. at present, which the holder of 18 ordinary will receive 5/- against 5/4.8d. at present. If the calculation is worked on earnings, rather than dividends, per share, the result is as follows:— s. d. Earnings (1927) on 21 Meadow Dairy preferred 7 7.2 Earnings (1927) on 18 Meadow Dairy ordinary 6 6.2 Earnings (1928) on 5 Home and Colonial 4/- shares 6 1.7 “On tlie basis of the Stock Exchange quotations prevailing in the middle of this week, 21 Meadow Dairy preferred are worth £4/14/6, and 18 ordinary £4/12/3, while five ‘split’ 4/- Home and Colonial ordinary shares (i.e., one existing £1 share) are worth, ex 3/6 final dividend, £4/6/6. “ Terms Not Attractive.” “From the point of view of the outside Meadow Dairy shareholders, therefore the terms are clearly not attractive. Why, then, did they prove sufficiently so to the Insiders to Induce them to enter the merger on such a footing'.' To return, for the moment, to the Home and Colonial side of the question, it will be found that if (a) the newly created ‘privileged’ ordinary shares, with special voting rights, which have a nominal value of £155,000, are taken up by Home and Colonial rather than by Meadow Dairy interests, and (b) the whole of the Meadow Dairy shareholders, ‘lnsiders’ and ‘outsiders,’ come in under tl\e terms of the present offer, the issued capital of the Home and Colonial will be £3,151,428. But at last week’s meeting the latter’s maximum authorised capital was raised only to £3,000,000. Can it be that the Meadow Dairy interests who have contracted to come into the merger, are to receive, in fact, the new ‘privileged’ shares as part of their holding? If the figures are recalculated on this hypothetical basis, it would appear that the interests in question will hold £155,000 out of a total issued capital of £2,996,428 in the Home and Colonial, and will have 1,550,000 votes, or 50.1 per cent, of a total of £3,091,428. Does the merger, then, represent, not the acquisition of the Meadow Dairy by the Home and Colonial, but tlie control of the latter by certain interests which already control the Meadow Dairy? The Home and Colonial chairman stated at last week’s meeting that the creation of the ‘privileged’ shares ‘is simply to ensure that the control of the company remains in the same hands as for many years past, and incidentally it will secure (he effective working of the joint management proposals.’ and also declared that the control would not be foreign.” N.Z. PORK PRAISED IN LONDON ' The London manager of the New Zealand Meat Producers' Board was recently interviewed by a deputation from the Retail Meat Traders’ Association at Home on the question of New Zealand porker pigs. He reports that in the course of the discussion it was very pleasing to hear the praise of the quality of New Zealand pigs by all the members of the deputation. One speaker, a large butcher who deals in New Zealand pork, stated that the quality of the New Zealand article was ideal, and “just the type of pig required by the retailers.” “These remarks are very encouraging,” says Mr. Forsyth, "and show the interest tliat New Zealand porker pigs, have aroused in tlie retail trade. This is due in a large measure to tlie board’s efforts In advertising, and in getting a fairly wide distribution through many of the stalls on Smithfield market.”