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Compac vendors in line for $230m earn-out

NZN 28/02/2017 Pattrick Smellie

The New Zealand founders and former shareholders of the Compac fruit sorting company are in line for up to $230 million in earn-out payments on top of the $70 million paid for the company by the Norwegian food, recycling and mining sorting business Tomra.

The detail of the deal, announced last October, emerges in the Overseas Investment Office's notification of foreign investments approved in January and in a presentation to shareholders published by Tomra with its fourth-quarter results last week.

Tomra executives disclose that they had bought Compac in a distressed state, making losses caused by a lack of cash flow owing to over-extension in some parts of its fast-growing business, in spite of $152 million of revenue in the most recent financial year, ended June 30.

"The financial history shows a company that has been in distress, short of cash flow because of loss-making activities in some areas," Tomra president and chief executive Stefan Ranstrand told analysts last Thursday in a video briefing published on the Tomra website.

Presentation slides say Compac disposed of businesses in Spain on February 1 and is "refocusing its operations in Latin America to be sales and services, and not manufacturing".

This was expected to cut revenue by around $25 million in annual revenue.

The New Zealand vendors were planning to continue operating distribution businesses in Spain and Italy, said Mr Ranstrand.

The OIO documents list Hamish and Kim Kennedy and Brian Leaning as owning 75.03 per cent of Compac prior to the sale. Hamish Kennedy founded the company in 1984.

Other New Zealand shareholders owned the remainder of the business, which developed technology ideal for sorting fruit such as apples, kiwifruit, and stone and citrus fruits.

Mr Ranstrand described Compac's fresh fruit sorting equipment as world-leading, with a strong position in the US market.

The New Zealand-developed equipment digitally examined the inside and outside of fresh produce to allow very accurate grading and customer satisfaction.

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