LIC scraps $70m dairy tech deal as Covid-19 chills shareholder sentiment

An agtech deal which would’ve seen one of New Zealand’s largest agribusinesses go global has been killed off due to the Covid-19 pandemic.

Livestock Improvement Corporation (LIC) shareholders have voted against the proposed acquisition of a majority stake in Afimilk, an Israeli provider of tech to the dairy industry.

However, LIC will continue to consider investments in other companies that align with its wider strategy, its chairman told AFN.

The New Zealand company – which is a cooperative owned by Kiwi dairy farmers – made a bid of $70 million for 50% of Afimilk back in February.

Speaking at the time, LIC chairman Murray King said the investment would give the cooperative access to data to improve dairy outputs – including “data on other farming methods beyond pastoral held by Afimilk” – while also granting it a wider global footprint.

“It’s vital we keep our world-leading edge in pastoral dairy farming data, while broadening access to new information to meet future needs and challenges. The investment in Afimilk will do both,” he said.

But when the deal was put to LIC shareholders yesterday, 70% voted it down. A minimum of 50% votes in favor was required for the acquisition to go ahead.

King suggested in a statement released today that market concerns in the wake of Covid-19 had influenced the shareholders’ decision.

“When we announced this proposal, no one could have foreseen the rapid and unprecedented impacts of Covid-19,” he said.

The cost of the deal in local currency had ballooned from NZ$109 million to NZ$118 million due to foreign exchange fluctuations.

King added that LIC will continue to seek out “strategic opportunities,” but its immediate focus would now be “supporting [its] shareholders as they navigate their farming businesses through the challenges of the next few months.”

Still in the game

Giving an indication of what types of opportunities LIC is considering, King told AFN that the cooperative “will invest in companies that are consistent with [its] strategy.”

Dairy farming is going through rapid transformation, and “to protect against disruption” LIC will explore investments that can enhance its access to relevant data, he added. This includes deals that bring “increased use of in-line milk meters and animal monitoring systems, such as collars.”

Hamilton-based LIC was established in the early 20th century by Kiwi dairy farmers to carry out herd testing. It later moved into research and development around cattle genetics.

In 2016, the cooperative underwent restructuring which saw it separate its herd improvement and agritech businesses. Since then it has been refocusing its strategy around “innovation-led growth.”

While King told AFN that LIC already has “wholly owned subsidiaries and a number of investments in New Zealand and offshore,” the Afimilk proposal likely signalled a move towards more activity on the mergers and acquisitions front.

Afimilk has roots in the Israeli kibbutz movement, and in recent years has become one of the world’s leading providers of milk meters, cattle behavior sensors and ‘smart collars’, and farm management software for dairy farmers.

According to LIC, Afimilk is profitable, with revenue of $57.4 million in 2019.

The Israeli company declined to comment when contacted by AFN.