The rural services group Allied Farmers has announced it will buy into a land management company, and in two years, may take it over completely.
Allied has signed a conditional agreement to purchase half the shares of the New Zealand Rural Land Management Limited Partnership (NZRLM) for $2.5 million.
NZRLM is a new entity created to manage the new NZ Rural Land Company Limited (NZRLC). NZRLC will acquire rural land and lease it to farming operators.
Allied Farmers chair Richard Perry said there was compelling long-term value in owning rural land, and the move was helping stimulate a sector struggling to get funding from traditional sources.
"Essentially we're seeing a lot of pressure on the rural sector around reduction of debt - being driven by a number of sources - but in particular we're seeing a tightening of credit to the rural sector and major restructuring, and the need for more credit to be in there from alternative sources."
The purchase would be funded by a share issue.
However it's conditional on NZRLC completing an initial public offer ahead of listing on the local stock exchange in December, and will take place after that has happened.
The offer was expected to be for $150m, with Allied not committed to taking up a stake. Allied has the option to acquire the remaining 50 percent of NZRLM after two years.
Perry said on top of the Allied Farmers share issue to cover the NZRLM purchase, the rural services group would also issue shares to raise money to expand its financing operations.
"We have a small financing business that finances livestock at the moment and... it's hard to access working capital, so we've announced previously our plans to expand our existing business of extending finance to food producers, and we're seeking capital to assist us in doing that.
"That's another project that we're hoping to have formalised in the not-too-distant future."
Shareholders would vote on the move at the annual meeting, the date of which would be announced shortly.
Allied Farmers and its subsidiaries NZ Farmers Livestock Ltd, Farmers Meat Export Ltd and NZ Farmers Livestock Finance Ltd are a rural services group, with its predominant activities comprising the sale of livestock agency services, the procurement and processing of calves, and the provision of livestock financing.