Agenda 2000 proposals need changes – COPA
Genus says City offer no benefit to shareholders
By Philip Clarke
GENUS senior management views the recent approach by a City-backed consortium as a compliment, albeit an unwelcome one.
Last week the consortium, comprising venture capitalists Alchemy Partners and AI specialist Breeding Services Ltd, revealed it had made an indicative offer for Genus shares of more than £27m, worth an estimated £1.20 a share.
It was rejected out of hand by the board as being of "no benefit to shareholders". "But the fact they approached us at all means they must think they can make some money out of us, which is actually quite a compliment," said Genus chief executive, Richard Wood, in an interview with FW this week.
He believes Alchemy took the unusual step of going public after the rejection to try to force Genus into discussions. But, according to Mr Wood, farmers would be best-served by retaining control of their company and seeing it progress towards a full stock market flotation in three years time. "We have already turned the business round and are on track to raise operating profits and returns to shareholders."
Genus was a victim of its own success, he added. Faced with a shrinking market for dairy genetics the company had had to diversify. To do this, it had to attract funds by raising its profile and improving its financial performance. But the downside was that this also made Genus more vulnerable to venture capitalists.
In particular, the company had generated a cash pool of more than £10m to finance its recent expansion through the sale of assets. This, said Mr Wood, made the company even more attractive.
But consortium manager, Alex Park, of Cheshire Breeding Services, is adamant that short-term gain is not the motivation behind the approach. His concern is that Genus should refocus on its core activities.
"I fail to see why the company should be moving into arable consultancy when it is leaking market share at the AI end," he said. And he added that Alchemy Partners had only been brought in as possible financiers after plans had been drawn up with other consortium members.
He said the group was still considering whether to launch a formal offer, but had been encouraged by farmer reaction so far. "They are telling us Genus was wrong to reject us so quickly and would like to know more about what is on offer."
But, while doubting the intentions of the consortium, Mr Wood also believed the indicative price seriously undervalued the company.
Alchemy Partners has said its offer would be "in excess of the net assets" of Genus, quoted at £27.45m in the company accounts to Mar 31, 1997. But Mr Wood said that took no account of goodwill, which, for a growing company like Genus, was considerable. Furthermore, the figure in the accounts was out of date, being about 30% below the companys true asset worth.
But as a result of the approach, Genus has brought forward plans to improve its share trading system, which to date has only seen a limited number of transactions. In a letter to shareholders this week, Genus promised to introduce a more regular and flexible facility as soon as possible.
Mr Wood stressed that, so far, no formal offer has emerged. "If one does, then we will have it independently assessed by our financial advisers before deciding whether to recommend it to shareholders."
• Genus this week completed its purchase of cattle breeding business Livestock Services UK, from Scot-tish Milk. It will now trade as Genus Scottish Livestock Services. *
Richard Wood:Genus has become attractive to venture capitalists.
Agenda 2000 proposals need changes – COPA
EU farm group COPA demanded major changes to the Agenda 2000 proposals this week, warning that more money must be available if EU agriculture is not to be worse off.
COPA president, Luc Guyau, rejected the plans at a public hearing on the CAP reform plans, saying they will lead to annual income losses for farmers of between £3.8bn and £4.5bn.
They will, he claimed, put whole farming sectors at risk and could lead to the re-nationalisation of the CAP, which was totally unacceptable. The plans for oilseeds, for example, would force many farmers out of business, he warned.
COPA has presented its own proposals for the cereals sector based on decoupling only a part of the aid from production. But COPAs secretary general insisted this week that the group could accept cereal price support cuts, if farmers are fully compensated.
It has also argued that dairy price cuts are unacceptable without full compensation. In the case of beef, the group believes there should be a more balanced approach between price support and supply management.
Mr Guyau refused to give an opinion on plans to limit the overall amount of aid going to farmers, saying it was still being examined by COPA.
Many Euro-MPs also hit at the Commissions plans this week, but some said COPA had failed to give a clear line on what it wanted. *