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Halberd Capital Partners. Project Albatross.
Preliminary, outside-in commercial due diligence
briefing on Aurora Eggs, the New Zealand shell-egg producer. Strictly private and confidential. Pre-letter-of-intent.

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This briefing covers three things: a primer on
egg-production economics, three preliminary
findings on Aurora and the New Zealand market, and three open questions for confirmatory diligence. It is outside-in, pre-letter-of-intent, and makes no recommendation. The Investment Committee decides.

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First, a primer. The shell-egg supply chain runs
end to end from breeder genetics, through pullet
rearing, the laying period, grading and packing, distribution, and finally the retail, foodservice, and industrial channels.

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At Aurora's scale, grading and packing happen
in-house at its two plants, and retail eggs ship
direct to the supermarket distribution centres with no wholesaler in between.

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The value chain is lopsided. On a dozen
free-range eggs retailing around eight dollars
fifty, the producer sells to the retailer at a wholesale gate of about five dollars forty, and earns roughly twelve to sixteen percent EBITDA on that gate price.

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The retailer, by contrast, captures about three
dollars ten of gross margin per dozen, and makes
around two and a half times the producer's EBITDA per dozen. Retail is structurally the highest-margin, most asset-light step; the producer carries the birds, the sheds, and the consent risk.

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Colony is the thinnest tier on margin per dozen,
as well as the one facing the twenty
twenty-seven shelf-access deadline. Aurora has forty percent of its flock in colony. That is a double jeopardy.

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Now the bird. A commercial layer has three
phases: pullet rearing, peak lay, and
depopulation. The pullet phase runs from zero to about eighteen weeks. The bird is eating and growing and lays nothing you can sell. By point of lay she has cost roughly eight to ten New Zealand dollars in sunk rearing cost.

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She comes into lay, peaks around twenty-five to
thirty-five weeks, and produces about three
hundred eggs per laying year, or around two hundred and eighty per calendar year. Commercial life ends around seventy to eighty weeks. Nobody serious moults and restarts anymore, because second-cycle eggs cannot be sold to the major retailers.

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On a six-hundred-thousand-bird operation, you
cycle through about six hundred thousand layers
every fifteen to eighteen months, plus a parallel pullet population of around one hundred and twenty thousand to replace depopulating flocks. Total animal throughput is nearer seven hundred and twenty to eight hundred thousand birds at any time.

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Feed is the dominant input at sixty to
sixty-five percent of cash cost, mostly imported
grain with a four to six month pass-through lag to retail. Sector EBITDA margins cluster at eight to fifteen percent, with most operators at ten to twelve. A target reporting above thirteen percent warrants scrutiny of its addbacks.

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Finally, the by-product and revenue-offset
economics that shape the bottom line. Spent hens
are closer to a cost than a revenue line. The three pathways - pet-food ingredient, rendering, and live export to the Pacific - pay only forty cents to one dollar twenty per bird, sometimes nothing. Higher-value pathways have not scaled in New Zealand.

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Layer manure is a real offset that people miss.
A six-hundred-thousand-bird mix produces
eighteen to twenty-two thousand tonnes of manure a year, sold to the Ravensdown and Ballance fertiliser co-ops at fifteen to twenty-five dollars a tonne. That is roughly three hundred to five hundred thousand dollars a year of revenue offset.

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Grade A eggs are sixty-five to seventy-five
percent of volume and the main money. Cracked
and Grade B eggs, around twenty-five to thirty percent, clear into the liquid-egg breaking market, with outright spoilage of one to five percent depending on the grading line.

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One caveat the sell-side sometimes floats:
alternative-use land optionality - data centres,
solar, dairy. In practice, rural consenting takes twenty-four to thirty-six months and the buyer pool is small. Do not pay for that optionality in the headline price.

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Part two. Three preliminary findings on Aurora
and the New Zealand egg market.

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Finding one. Aurora is the number two producer
by national volume, at about eighteen percent
share, behind Mainland Poultry and ahead of Heyden, Better Eggs, Zeagold, and Henergy. Because it is family-controlled and private, it is invisible in analyst coverage, and must be added on top of the public roster, not squeezed into it.

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The deal-defining issue is its forty percent
colony exposure against the retailer-driven
cage-free deadline at the end of twenty twenty-seven. Foodstuffs and Woolworths New Zealand, together about seventy to eighty percent of grocery volume, will de-list colony eggs from the first of January twenty twenty-eight, with no grace period.

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Converting two hundred and forty-four thousand
colony birds to barn costs about eleven to
sixteen million New Zealand dollars, on a ten to eleven million EBITDA base. The return on that capex is continued market access, not incremental margin. End to end, consents, build, and day-old-chick supply take twenty-four to thirty months, and only nineteen months remain to the deadline. No consent is visible on the public register.

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Finding two. The free-range premium is
compressing, not holding at thirty percent plus.
In actual twenty twenty-six wholesale transaction prices, free-range sits at eighteen to twenty-two percent over barn, not thirty. Pak'nSave is as low as fifteen to seventeen percent; New World and Countdown around twenty to twenty-two.

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The trajectory is eighteen percent in financial
year twenty-six, fourteen in twenty
twenty-seven, and twelve in twenty twenty-eight, as barn capacity scales ahead of the deadline. Only thirty percent of Aurora's flock is premium-bearing, so the compression hits a real but bounded slice of revenue.

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The thirty-percent-plus figure is a
Phase-One-era number that the broker and the
information memorandum still quote. The retailers, who actually set the price, are not paying it in twenty twenty-six.

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Finding three. Aurora's headline adjusted EBITDA
of twelve point six million New Zealand dollars,
a fourteen point nine percent margin, sits above the sector norm of ten to twelve percent, and above its own reported ten point eight million at twelve point eight percent. The adjustment addbacks need audit scrutiny before they are trusted.

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Set against that, there is a credible post-close
value-creation programme an owner would execute,
not the seller. An in-house feed mill, automated grading lines across both plants, and a professional commercial general manager could lift run-rate EBITDA by three point five to five point five million - a thirty-five to fifty percent uplift over three to four years.

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On valuation, the broker asks twelve to fourteen
times EBITDA, implying about one hundred and
thirty to one hundred and fifty million New Zealand dollars of enterprise value. Allowing for colony risk and premium compression, fair value is closer to eight to ten times, or about eighty to one hundred and ten million, rising to around one hundred and fifteen million if you credit the buyer's uplift. The gap is the negotiation.

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Part three. Three open questions that
confirmatory diligence must answer.

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Open question one. Colony-to-barn consent and
timeline status. This is the single biggest
deal-defining variable. Has Aurora lodged resource and building consents with Selwyn and Waikato councils, or begun pre-lodgement engagement? When does physical build start, and is day-old-chick supply from Northern Hylines secured?

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A one-day search of council records, plus a
direct question to the managing director,
answers it. If consents started six to twelve months ago, the deadline is just achievable. If they start now, completion slips into twenty twenty-eight, and a quarter or two of colony volume is stranded at industrial prices - a three to four million EBITDA hit per year of slippage.

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Open question two. Customer concentration and
contract terms. The insider places the top three
retailers at sixty to seventy percent of Aurora's revenue - almost certainly Foodstuffs North Island, Foodstuffs South Island, and Woolworths New Zealand - essentially two strategic accounts across three legal entities.

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Confirmatory diligence needs the audited top-ten
customer breakdown, including the Foodstuffs
North versus South split, plus the contract terms: how long-dated, what notice periods, and whether cage-free clauses are already inserted. The seller will not volunteer this. It is the number-one confirmatory priority.

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Open question three. EBITDA quality, flock and
feed-cost verification, and the avian-influenza
overlay. We need the audited financial-year-twenty-four EBITDA bridge and addback schedule, the verified flock count and current production-system mix, and the feed-cost pass-through and electricity tariff-renewal exposure into twenty twenty-seven and twenty twenty-eight.

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On H7N6, the World Organisation for Animal
Health self-declaration is the ground truth: one
Otago property, stamped out, New Zealand HPAI-free again from mid-twenty twenty-five - a three to five percent one-off financial-year-twenty-five cost overlay that normalises. Speculation about a next outbreak should be discounted, not modelled.

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In summary. Aurora is a real, profitable,
number-two platform with a genuine post-close
value-creation story, but its colony exposure, a compressing free-range premium, and above-norm reported margins make the broker's twelve-to-fourteen-times ask hard to justify without confirmatory evidence.

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This briefing is preliminary, outside-in, and
pre-letter-of-intent. It makes no
recommendation. Sources include the sell-side information memorandum, commissioned expert transcripts with Rob Calthorpe and Henry Calder, the Egg Producers Federation, and public sector data. The Investment Committee decides whether to request the CIM, sign an NDA, and move to confirmatory diligence.