An Interesting Week

The announcement by GPG that they are considering splitting up the company has certainly achieved a split in the Board. Tony Gibbs has been sacked from the board of GPG for criticising the move to split the company up. Gibbs is claiming he was sacked for telling the truth. He does however remain as Chairman of both Tower and Turners and Growers. Both of these companies are very well known in New Zealand having been around in various forms since the early 1900’s. Turners and Growers is the nemesis of Zespri and are currently fighting for licences to sell their own varieties of Kiwifruit.

 

In some ways it is quite ironical in that Turners and Growers were the pioneers of Kiwifruit exporting in this country. If we go back to the 1980’s there were six licensed Kiwifruit Exporters. Other exporters at that time included Auckland Export, Dalgety’s, Produce Markets, Fruitfed, and Jordans. They all used to compete fiercely for fruit, with some or possibly all of the companies effectively rebating commission to make it appear that their returns were better than they were.

 

Kiwifruit marketing is effectively a monopolistic operation. Zespri controls it, and other companies may export provided they have agreements with Zespri. Zespri appear to have done a relatively good job, by bringing an industry back to life, and also taking significant stakes in the marketing of other countries’ Kiwifruit production. It remains to be seen how much damage is caused by the impact of serious kiwifruit diseases in some of the countries where Zespri obtains it’s supply from. Investors can effectively invest into the Kiwifruit industry through shares in several Kiwifruit companies which have evolved through post production facilities such as pack houses. Some have also developed their own orchards.

 

There has been a massive groundswell of support for Allan Hubbard of South Canterbury Finance fame. The public are rallying against the actions of various regulatory authorities and the serious fraud squad for businesses and charitable trusts owned by the Hubbards excluding the beleaguered South Canterbury Finance. Hubbard has made his wealth by using other people’s monies. Sure he has been a major benefactor to a lot of charities over the years. It is simply not good enough for these businesses to have insufficient records and documentation when they are dealing with other people’s monies.

 

The Government agencies have taken control primarily in order to safeguard what could be potentially over a five hundred million dollar payout under the Crown Guarantee if South Canterbury Finance were to default and go into receivership. This is looking increasingly likely as the Credit Rating has been downgraded, and reinvestment rates by debenture holders are declining. There is a shortage of white Knights who will pay above the odds by injecting money into the company. Allied Farmers have learnt the hard way when they took over the Hanover Finance book. South Canterbury could be similar, in that there may be a lack of documentation and a tangled web of loans. Time will tell.