By Paul McBeth
Veritas Investments and local Burger King franchise operator Anatares Restaurant Group have agreed to sell the assets of their joint venture which supplied beef patties to the fast food operator after the deal broke down last year. The shares slumped.
The parties were locked in a dispute over the interpretation of the supply deal, which was set to end on April 24 after Antares won an arbitration hearing, which Veritas had planned to appeal before changing its mind. The Auckland-based company today said it had reached an agreement with Antares to start an "orderly wind down" of Kiwi Pacific Foods by selling its assets, including land and buildings and plant and equipment.
The shares dropped 15 per cent to 23 cents, matching a record low set earlier this month, and valuing the company at about $10 million.
The proceeds will be used to repay the joint venture's external debt, with any leftovers distributed to each partner. As at Dec. 31, Kiwi Pacific Foods had total assets of $7.2 million and liabilities of $5 million, according to Veritas's first-half report.
"The Veritas board has already provisioned for any potential loss arising from this wind down in its half-yearly accounts," it said in a statement.
Veritas bought half of meat patty maker Kiwi Pacific Foods in late 2013, which held a preferred supply deal with Burger King. The other half of Kiwi Pacific Foods is owned by Antares.
The company faced litigation costs of $279,000 in the six months ended Dec. 31 relating to the arbitration, and wrote down the value of the Kiwi Pacific Foods unit by $2.8 million in the period.
Veritas reported a first-half loss of $4.8 million as it booked a series of impairment charges, including the Kiwi Pacific writedown, and hired PwC to review its operations.