AgResearch announced today that, subject to approval by its shareholding Ministers and satisfactory due diligence, it would purchase the assets of Canesis Network Ltd.

Over the past three months AgResearch has undertaken a process of seeking information from the shareholders of Canesis Network Ltd with the view to acquiring it.

Canesis, based at Lincoln near Christchurch, is an R&D company focused on fibrous proteins, biopolymers and innovative textiles, and is owned (74.9 per cent) by Wool Equities Ltd (WEL) and (25.1 per cent) by the Wool Research Organisation of New Zealand Trust (WRONZ).

AgResearch CEO Dr Andrew West said during the period of WEL and WRONZ ownership Canesis had divested Wool Interiors and other non-core capabilities, and had focused back on its core science and technology business. 

“We wanted to acquire Canesis because its business is now so complementary to what AgResearch already does. We will combine AgResearch’s on-farm knowledge of sheep with Canesis Network’s off-farm knowledge of wool processing and products.

“Having looked closely at the company we found a degree of synergy that warranted the acquisition,” said Dr West.

WEL Chairman Richard Bentley said the purchase preserved the important relationship between Canesis and WEL subsidiary Keratec, which is “very important for WEL”.
 
“AgResearch will be a good long-term owner as it has a great deal of knowledge in regard to pastoral sector R&D and possesses significant commercialisation expertise.”

He said as an organisation Canesis was looking forward to being part of building an even more significant CRI, adding to AgResearch’s global contacts and diversifying its revenue streams.

WRONZ Chairman Mike Petersen said the acquisition of Canesis by AgResearch was a significant step forward for the New Zealand wool industry.

“WRONZ has just acquired Wool Interiors primarily to internationally market the New Zealand wool appellation. With AgResearch acquiring Canesis we can more closely align on-farm R&D in wool production with off-farm R&D in wool processing and products.

“These two developments in wool marketing and R&D are particularly exciting, and demonstrate a growing confidence in the future of the wool industry, coming as they do on top of the industry and the Government’s creation of the Wool Industry Network.”

In a separate deal, AgResearch is currently negotiating with WRONZ to purchase the land and buildings occupied by Canesis at its Lincoln site.

ENDS

For further information, please contact:

AgResearch Media Advisor, Mike Eng ph 03 325 9967 or 029 489 9139

AgResearch Corporate Affairs Manager, Allanah James ph 03 325 9989 or 029 983 3989

Wool Equities Ltd Chairman, Richard Bentley ph 0274 485 900

Wool Research Organisation of New Zealand Chairman, Mike Petersen ph 021 243 7344

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Questions and Answers

Answers to be attributed to Dr Andrew West CEO AgResearch

• Canesis has had some financial issues - why would AgResearch want to buy it?

Canesis’ finances are steadily improving following a significant restructuring. The principal reason AgResearch undertakes any acquisition is to benefit New Zealand. Canesis entirely complements AgResearch’s focus on the pastoral and biotechnology sectors.

• How will this affect staff?

There will be no impact on AgResearch staff. Impact on Canesis employees is a point of negotiation.

• What is the process and timeline from here?

We will map out an integration process and timetable quickly. We haven’t done the necessary level of planning yet and it would have been inappropriate to do so until the acquisition was confirmed, subject to our shareholding Ministers’ approval and full due diligence.

• Do you plan to restructure Canesis?

Canesis staff will be blended into a number of AgResearch’s operating units. It will not exist as a standalone company.

• How do you feel about acquiring Canesis ahead of Lincoln University?

We don’t know how serious the University was about acquiring it. As a consequence of this acquisition AgResearch will now be located beside Lincoln University and we relish the prospect of a stronger relationship as a consequence.

• Will the existing AgResearch staff and resources move onto the Canesis site?

Yes, though I would expect this to be a staged move.

• Will you refurbish the Canesis buildings?

In time we will. We need to create more space for our staff at Lincoln. However, the degree of uncertainty associated with the FRST funding round for AgResearch over the next two years means it would be irresponsible to undertake a major building programme at AgResearch at this time.

• There does not appear to be much interest in NZ for wool research – so why do you want to buy an organisation doing this?

We feel strongly that wool is an elite natural product with a reasonable future if appropriately marketed and supported by new technologies.

• How much did you pay for the assets?

$6.5 million for 100% of the assets. This does not include the land and buildings for which a separate deal is being negotiated.

• How do you justify the price?

We acquire a superb set of scientific, technological and engineering talents, and an organization with a wonderful record of innovation.

• Wouldn’t you have been better to invest that amount of money in something else with more obvious security of a pay off on the investment?

Our job is to help New Zealand become more economically productive and Canesis staff and resources will help us do just that.

• How will you get Canesis to produce better profits and how long will that take?

Canesis’ profits won’t be able to be directly identified in the future because they will contribute to the overall AgResearch result. The key drivers for any CRI are revenue and earnings -  so with Canesis that comprises the revenue from contract R&D and earnings from the sale or licensing of IP. We believe that the revenues and earnings will rise over time.

• What is the biggest challenge facing AgResearch in making a go of this acquisition?

The successful integration of Canesis staff and resources into AgResearch.

• Are you sending a signal to the NZ sheep industry by making this acquisition?

Yes. We think the sheep industry already performs extremely well and that it has a fantastic future. As well as that, Canesis researchers can also contribute to the dairy industry in the areas of high value foods and sophisticated food processing; this is probably also true for the red meat industry.

• Who will run the Canesis part of AgResearch?

We’ve yet to determine how Canesis will be integrated into AgResearch.

• Will the current CEO stay?

As Canesis’ staff will be blended into AgResearch’s operating units there will not be a stand-alone CEO position for Canesis within AgResearch.

• Will Canesis keep its name?

That’s yet to be determined.

• Is it appropriate for a Crown Research Institute to acquire a private company?

It’s happened before. AgResearch acquired the Meat Industry Research Institute of New Zealand (MIRINZ) in the 1990s and NIWA recently acquired a 50% share in Coal Research Ltd.

ENDS