1 00:00:01,080 --> 00:00:08,966 Project Albatross. Aurora Eggs Limited. A preliminary outside-in commercial due diligence briefing for the deal sponsor. 2 00:00:08,966 --> 00:00:19,369 A short business model primer, then three preliminary findings, then three open questions for confirmatory diligence. The verdict sits with the Investment Committee. 3 00:00:19,369 --> 00:00:29,786 Headline figures are U.S. dollars at the firm's fiscal 24 rate, 60.2 U.S. cents per New Zealand dollar. New Zealand dollars appear on screen. 4 00:00:31,616 --> 00:00:41,119 First, the primer. The chain runs from breeder genetics, concentrated in one German group, through pullet rearing, lay, grading and packing, to the shelf. 5 00:00:41,119 --> 00:00:49,857 Feed is the largest input, 55 to 65 percent of variable cost, with spot grain passing through on a 4 to 6 month lag. 6 00:00:49,857 --> 00:01:06,532 Retail grocery takes 70 to 75 percent of volume, and the Foodstuffs and Woolworths duopoly controls the shelf. A producer earns 21 to 51 U.S. cents of EBITDA per dozen. The retailer makes about 2.5 times that. 7 00:01:06,532 --> 00:01:17,421 All-channel value is about 325 million U.S. dollars, 540 million New Zealand, growing 1.3 to 1.5 percent a year. 8 00:01:19,251 --> 00:01:27,879 The hen runs on an 18 month clock. Pullet rearing to week 18, no eggs, 5 to 6 U.S. dollars sunk per bird. 9 00:01:27,879 --> 00:01:37,206 Lay peaks at 25 to 35 weeks, around 300 eggs per laying year. Depopulation comes at 70 to 80 weeks. 10 00:01:37,206 --> 00:01:48,492 Flocks are staggered. Aurora's 610,000 hens plus around 120,000 pullets mean 720 to 800 thousand birds on farm at any time. 11 00:01:48,492 --> 00:01:56,556 The operator read. The bird is a depreciating asset, and everything rides on landing the next pullet flock into lay on schedule. 12 00:01:58,386 --> 00:02:07,499 By-products shape the bottom line. Grade A is the main money. Seconds, 25 to 30 percent of volume, clear at low margin into liquid egg. 13 00:02:07,499 --> 00:02:15,231 Spent hens fetch 24 to 72 U.S. cents per bird. Disposal is a cost line, not a value lever. 14 00:02:15,231 --> 00:02:23,148 Manure is the offset that gets missed, 180 to 300 thousand U.S. dollars a year to the fertiliser co-ops. 15 00:02:23,148 --> 00:02:36,487 And the land. The sell side floats data-center and solar optionality. Both sites are rural-zoned productive land outside the Auckland data-center cluster, so the working case carries no optionality premium. 16 00:02:38,317 --> 00:02:45,671 Finding one. The 2027 cage-free deadline is retailer policy, not regulation, and it is hard. 17 00:02:45,671 --> 00:03:00,091 Phase 2 is Foodstuffs' public pledge of cage-free packaged shell eggs by end 2027, with Woolworths New Zealand already effectively there. Colony comes off shelf on the first of January 2028, no grace period. 18 00:03:00,091 --> 00:03:12,025 Colony is still roughly 40 percent of a national flock of about 3.75 million hens. The official 33, 33, 34 split is a stale 2022 number. 19 00:03:12,025 --> 00:03:23,547 Aurora is the most exposed producer in absolute terms. 40 percent of its flock, about 244,000 birds, the largest single colony block among the top six. 20 00:03:23,547 --> 00:03:33,638 Conversion favours barn at 27 to 39 U.S. dollars per bird, a third of free-range capex, so the colony exit flows into barn supply. 21 00:03:35,468 --> 00:03:43,180 Finding two. The free-range premium is compressing, and the sell-side number does not survive transaction evidence. 22 00:03:43,180 --> 00:03:48,982 The broker and the draft memorandum carry a 30 percent plus premium continuing. 23 00:03:48,982 --> 00:03:58,990 The industry association calls it meaningfully below 30 and falling. The expert sees 18 to 22 percent in current transaction prices. 24 00:03:58,990 --> 00:04:07,693 His path. 18 percent in fiscal 26, 14 in fiscal 27, 12 in fiscal 28, downside 8 to 10. 25 00:04:07,693 --> 00:04:16,554 Barn supply scaling into the colony exit gap removes the scarcity. Aurora's premium-bearing volume is its 30 percent free-range flock. 26 00:04:18,384 --> 00:04:24,850 Finding three. Aurora's number two share is real, but the structure is mid-pack and the ask is unsupported. 27 00:04:24,850 --> 00:04:35,675 Aurora is invisible in public coverage. Bottom-up, it holds about 18 percent of national volume, behind Mainland at 27, additive to the public roster. 28 00:04:35,675 --> 00:04:46,391 It runs 4 of 7 integration stages, no feed mill, no breeder, no category captaincy. Half its retail volume is private label. It is a price-taker. 29 00:04:46,391 --> 00:04:59,603 Fiscal 24 revenue is 50.9 million U.S. dollars, EBITDA 6.5 million at a 12.8 percent margin. That is 84.6 and 10.8 million New Zealand. 30 00:04:59,603 --> 00:05:17,345 The ask is 12 to 14 times trailing EBITDA, roughly 78 to 90 million U.S. dollars of enterprise value. The direct precedent, Pacific Equity Partners buying Mainland in January 2025, printed at 7 to 7.5 times with the full stack. 31 00:05:17,345 --> 00:05:26,951 The firm's haircut chain lands at 5 to 6.5 times. The asking-side frame reaches only 8 to 10. That gap is the negotiation. 32 00:05:28,781 --> 00:05:36,031 The open questions. Question one. Where, exactly, is the colony-to-barn bridge to 2027? 33 00:05:36,031 --> 00:05:47,819 The lead-time stack is 24 to 30 months. Consents 4 to 6, build 14 to 18, pullet supply 6 to 9 in parallel. The deadline is about 19 months out. 34 00:05:47,819 --> 00:05:56,131 The memorandum claims consents in active progress and prices the program at 4.8 to 6 million U.S. dollars. 35 00:05:56,131 --> 00:06:11,467 The expert found nothing lodged in the Selwyn or Waikato public registers, and sizes the capex at 6.6 to 9.6 million U.S. His odds, 50-50 if consents are moving, zero if they start now. 36 00:06:11,467 --> 00:06:22,285 Each year of slippage puts 1.8 to 2.4 million U.S. dollars of EBITDA at risk, 3 to 4 million New Zealand, on a 6.5 million base. 37 00:06:22,285 --> 00:06:29,105 Confirmatory must see lodgement evidence, the committed equipment order book, and secured pullet slots. 38 00:06:30,935 --> 00:06:36,742 Question two. How concentrated is the customer book, and what sits in the contracts? 39 00:06:36,742 --> 00:06:46,203 The directional read puts Foodstuffs and Woolworths together at 60 to 70 percent of revenue. An estimate to verify, not a model input. 40 00:06:46,203 --> 00:06:56,482 Two private-label lines retender within 24 months, and one lost Pams tender is a 4.8 to 7.2 million U.S. dollar revenue cliff. 41 00:06:56,482 --> 00:07:04,470 Confirmatory needs the audited top ten, contract tenors, notice periods, cage-free clauses, and the tender calendar. 42 00:07:06,300 --> 00:07:12,362 Question three. What earnings base, and what governance platform, is a buyer underwriting? 43 00:07:12,362 --> 00:07:24,702 The teaser reports 6.5 million U.S. dollars of EBITDA. The memorandum prices off an adjusted 7.6 million. The 1.1 million of addbacks would need to survive an audit. 44 00:07:24,702 --> 00:07:34,268 Fiscal 25 actuals are unseen and carry a one-off 3 to 5 percent avian influenza cost overlay from the contained Otago outbreak. 45 00:07:34,268 --> 00:07:44,400 Management projects 5 to 7 percent volume growth against a 1.3 to 1.5 percent market. The gap is share capture to be tested. 46 00:07:44,400 --> 00:07:58,753 The broker markets a stable, aligned family and a partial sale. The expert reads a chair in her eighties stepping back, no named successor, and a full generational exit. Decision rights are confirmatory interview items. 47 00:08:00,583 --> 00:08:13,050 To close. A hard retailer deadline against the industry's largest colony block. A premium compressing on transaction evidence. A number two share on a mid-pack structure with an unsupported ask. 48 00:08:13,050 --> 00:08:19,621 Then the bridge to 2027, the customer and tender book, and the earnings and governance base. 49 00:08:19,621 --> 00:08:28,872 Sources and conversions sit in the deal-team workbook and transcripts. This assessment is for Investment Committee consideration. End of briefing.