Usbourne gets out of pigs
MERCHANTING group Usborne is quitting the pig production business, despite recovering from the heavy trading losses it suffered in 1994.
Agreement has been reached for BOCM PAULS to acquire its Daisy Hill Pigs subsidiary for around £7.4m, effective from early February.
Most recent accounts show that Usbornes pig business had started to break even by June 30, 1995, compared with the £12m loss it made the previous financial year.
But despite completion of a restructuring programme, the board has decided that the risks associated with pigs means the company is best off out of it.
In particular, it points to the contract with Unigates Malton Bacon Factory which takes 70% of Usbornes production. Although this protects against adverse price movements, it also imposes a ceiling on potential margins.
Daisy Hill Pigs is engaged in both breeding and rearing, with the emphasis on outdoor production. There are some 70 producers in the "partnership", finishing about 170,000 pigs a year.
These contracts will pass to BOCM PAULS as part of the deal.
The acquisition will take BOCM PAULS pig division to almost 700 producers finishing over 1.1m pigs a year. It will also be the first time the company has had contract breeding capacity.
Completion of the deal is conditional on Unigate not excercising an option it holds to acquire the shares of Daisy Hill Pigs on the same terms as the BOCM PAULS offer.
Such a move is thought unlikely, as Unigate has only recently got out of pig production, selling half its stock to Usborne in 1993 and the rest to BOCM PAULS in 1994.
The deal will enable Usborne to reduce net borrowings by £5m and give rise to a small profit on book value. The company will now focus on its Agricultural Services Division and intends to make further aquisitions in tis area.