Dairibord, Tavistock deal under CTC radar

THE Competition and Tariff Commission (CTC) is assessing a 2020 strategic alliance between Dairibord and Tavistock, its largest raw milk supplier.

The transaction is one of the applications that the CTC was considering in the first quarter of this year, the regulator said in its latest filings.

In 2020, Dairibord announced that it had entered into a partnership with Tavistock.

Under the deal, Dairibord would help Tavistock secure structured finance through loan guarantees and other capital raising methods to fund growth. Dairibord bought preference shares in Tavistock.

In its 2020 annual report, Dairibord said the partnership would result in the growth of raw milk intake, which would “feed into the long-term vision of Dairibord to develop the local milk supply industry to have capacity to fully displace milk powder imports, reduce production costs, increase product diversity, improve regional competitiveness and increase exports”.

Tavistock operates a dairy farm near Beatrice, which is owned by Christopher Hawgood, a long-time dairy producer who sits on the board of Dairibord.

In 2020, farmers produced little milk, as they reeled under the impact of high costs of stockfeed, the outcome of drought.

Raw milk intake last year declined by 6%, largely caused by reduced milk yield at dairy farms due to stockfeed price increases.

Between January and May, Dairibord sales volumes were up 49%, but milk sales were held back by a fall in raw milk supplies, which fell 2% over the period.

Dairibord accounts for 39,1% of national raw milk intake. It is currently in draw-out talks to merge with Dendairy, the number two producer in the country.

Kwekwe-based Dendairy, formed in 2004, is owned by the Coetzee family, with Scandinavian private equity firm Spear Capital holding a minority stake in the company. Spear bought 27% of Dendairy in 2015.

— newZWire