08 June 2021

LIC announces agreement to divest automation business

The LIC Automation product portfolio will join Allflex Livestock Intelligence (a business unit within MSD Animal Health which has manufacturing facilities at Palmerston North New Zealand).

MARKET STATEMENT

Livestock Improvement Corporation (NZX: LIC) announces it has entered into an agreement to divest its automation business to MSD Animal Health, a division of Merck & Co., Inc., Kenilworth, N.J., USA (NYSE:MRK) for an amount of NZ$38,100,000 and subject to a working capital adjustment.

The LIC Automation product portfolio joins Allflex Livestock Intelligence (a business unit within MSD Animal Health which has manufacturing facilities at Palmerston North New Zealand).

Completion of the transaction is subject to customary requirements and the transaction is expected to complete on or about 11 June 2021.

The transaction includes the following:

  • Continued migration onto new generation Protrack systems for customers with legacy technology, as well as associated software development
  • LIC to continue providing service and support to customers through transition
  • Ongoing interaction between Protrack operating systems and LIC’s herd management system, MINDA.
  • Access to data generated by the automation technology for LIC, to continue to support the co-op’s research and development activities.

LIC Board Chair Murray King says the divestment of the automation business is in line with LIC’s refined strategy, and will allow the co-op to sharpen its focus and play to its strengths delivering world-leading pasture based dairy genetics and herd management for New Zealand farmers.

“We are pleased that MSD Animal Health has chosen to acquire this technology for their Allflex Livestock Intellience Business Unit. We are confident this is the best way forward - for the technology, for our farmers who have invested in these systems and for the wider co-op shareholder base.

“MSD Animal Health has a reputation for investing heavily in research and development for animal health and welfare. The company has extensive scientific and technological capabilities that can take this technology to the next phase and deliver more value to farmers.”

King says LIC has a long-standing relationship with MSD Animal Health, through its Allflex Livestock Intelligence business unit and the companies will work together to support farmer customers through the transition.

“In making the decision to sell, it was important to us that the buyer would continue to support our existing farmer customers in New Zealand and we are pleased that both parties are aligned on this. We will work together to make the handover as smooth as possible.”

The LIC Automation team has been offered secondment to MSD Animal Health, to continue in their current roles.

King said the sale will conclude a longstanding, concerted effort by the co-op to attempt to grow the automation business and make it profitable, with moderate success.

Last year LIC shareholders voted down a proposal from the Board for LIC to purchase a stake in Israeli agritech company Afimilk, which had included a potential subsequent transaction for Afimilk to purchase LIC Automation. Following this, the Board agreed to reintegrate automation into LIC to try to enable the business to become cashflow positive and break even.

“We know automation delivers a lot of value on-farm, but despite significant efforts by our people, the automation business itself has seldom been profitable, partly due to the stabilisation of cow numbers in NZ dairy and limited traction in international markets.

“This divestment will allow us to focus on delivering value for our farmer shareholders - with the increased capital it will provide and, importantly, ongoing access to key data from the automation and sensor technology to support core LIC business into the future.”

MinterEllisonRuddWatts advised LIC on the transaction.

For more information please visit the Divestment of LIC Automation page.