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Scales to buy Hawke's Bay apple grower

NZ NewswireNZ Newswire 2/11/2016 Paul McBeth

Scales Corp has agreed to buy Hawke's Bay apple grower, packer and marketer Longview Group Holdings for $20.5 million, adding capacity to sell fruit into the fast-growing Asian market.

The Christchurch-based company's Mr Apple subsidiary will buy 100 per cent of the Longview shares and 22 hectares surrounding a coolstore and packhouse, expanding Scales' total planted apple orchard by 85ha, with a further 30ha of bare land for development, it said in a statement.

The deal will immediately lift earnings per share 4 per cent in the 2017 financial year. Scales has previously forecast 2016 net profit to be between $29.6m and $34.6m.

"Our strategy is to become the preferred supplier of apples within the Asian region," managing director Andy Borland said. "Longview's focus on near markets makes it a highly compelling addition to our existing operations."

New Zealand's biggest apple exporter doubled its annual profit in 2015, selling higher value products to key markets in Asia and the Middle East, beating the forecast in its 2014 prospectus.

That's not expected to be repeated this year with a more ordinary harvest tipped for the current year, an absence of insurance proceeds from a hailstorm last year and some provisioning for reduced use of its coldstore network.

Scales said the acquisition was "a critical addition" to meeting its goal of becoming Asia's supplier of choice by lifting its apple crop, giving it access to post-harvest infrastructure due to its own nearing full capacity, and providing a strong brand in the region.

The deal will be funded through cash and debt, and is expected to lift Scales' debt position at the end of the year to $30m-$35m. As at June 30, Scales held $6.8m in cash and equivalents, and $59m of debt.

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