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An Adelaide Hills-based biodynamic organic dairy producer that has been on and off the chopping block at Maggie Beer Holdings (ASX: MBH) since 2022 has finally been sold, with Katoomba Global Foods agreeing to pick up Paris Creek Farms (PCF) for $500,000
Katoomba, which goes by the name KG Foods and distributes a wide range of international brands including Al Wadi, The Rice Company, The Spice People, Maggi and Pangkarra, will also assume PCF's liabilities including staff entitlements.
The transaction compares to the $34 million paid to PCF's founders Helmut and Ulli Spranz in December 2017 by Longtable Group, in addition to paying all of the company's $7.6 million in bank debt at the time.
Longtable held a 48 per cent stake in Maggie Beer Products, and after acquiring the remaining stake in 2019 would change its name to Maggie Beer Holdings in mid-2020.
By the time of the name change the loss-making PCF business was already a write-off. In FY19 the group completed a review that led to a $15.9 million impairment of the asset, followed by a further $12.1 million impairment that December which brought goodwill down to nil.
PCF continued to prove challenging and in May 2022 the group completed a strategic review that determined its two dairy assets - PCF and St David's Dairy - were non-core, leading to a sales campaign to kick off that August to offload the businesses.
St David's was promptly sold to Goulburn Valley Creamery by the end of that month for $1.6 million, but no such agreement was struck for Paris Creek.
Within a year the group conducted yet another strategic review concluding it would be viable to upgrade the PCF dairy facility, specifically enhancing its "potential value as an internal asset for the manufacture and supply of Maggie Beer Products including the strategically important cheese products".
"The board has determined that with modest capital expenditure, the PCF facility is able to be upgraded and utilised as a financially and operationally sustainable dairy manufacturing asset," the company reported in June 2023.
"In the context of the company’s growth ambitions in this category, the decision for PCF remaining a core asset within the MBH Group has strong economic and strategic rationale," Maggie Beer Holdings stated at the time, reclassifying the business as no longer for sale.
But it was only a matter of time before PCF was again squeezing the group's bottom line, with another $4.6 million impairment charge booked in February 2024 as well as $800,000 in onerous contract provisions.
In June 2024, a year after management had expressed its renewed belief in the business, PCF was again put on the market with an active program to locate potential buyers.
Almost a year on from the start of that campaign, Maggie Beer Holdings made today's announcement with the transaction due for completion within 10 business days.
Maggie Beer Holdings anticipates the divestment of Paris Creek Farms will result in annualised cash flow savings of around $2.2 million, claiming the sale aligns with an ongoing focus on strengthening core premium brands and refining its operational priorities, while reducing complexity.
The group highlights the divestment also ensures continuity of operations at Paris Creek Farms, with local production and the brand continuing in the market.
The group says these outcomes were central to the transaction, reflecting the "value placed on the business’s local legacy and contribution".
"This is a positive step forward for the group, allowing us to sharpen our strategic focus on our core premium brands, particularly Maggie Beer Products," says Hamish McLeay, general manager of the company’s South Australian-based Maggie Beer Products and Paris Creek Farms.
"This divestment enables us to simplify our operations and better allocate resources to the areas with the greatest potential for growth. We’re pleased to see Paris Creek Farms continue under the ownership of KG Foods, with local jobs and brand presence maintained."
"The divestment of Paris Creek Farms is an important step in our strategy of simplification and accelerated profitability for MBH. We look forward to updating our shareholders on all of our progress with the release of the Company’s full year results," adds the group's chair Mark Lindh.
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