Australian agrifood company TasFoods is planning to acquire North West Tasmanian chicken producer Nichols Poultry for A$12.55m ($8.98m).
Under the acquisition terms, TasFoods would purchase Nichols' poultry processing facility, 91 hectares of farmland, feed mill, and a wind turbine that supplies power to the processing facility.
All employees working at Nichols' Poultry would be retained.
TasFoods will approach the shareholders to gain approval to raise $15-$20m funds for the purchase of Nichols Poultry, which is considered to be the Tasmania's second largest poultry processor.
The company is also seeking to raise funds for working capital.
TasFoods intends to expand the business from being a local Tasmanian brand to a national poultry distributor.
Nichols Poultry managing director Rob Nichols indicated that the move is in line with the company's expansion plans. He told abc.net.au: "Our last major expansion was a couple of years ago and that's now working really well for us. But we are already at the point where we need to grow again.
"For Nichols Poultry to achieve the potential, we all know it can do, we really wanted to bring somebody on board that could help us there."
Although the company received acquisition offers from several potential buyers, Rob Nichols said that the company wanted to retain its Tasmanian business model and its base in the North West Tasmania.
Rob Nichols added: "The flow-on effects are quite huge. If the business is to double from where it is at the moment, then we certainly need a huge amount of breeder facilities, we probably need new hatchery facilities.
"There's up to 20,000 tonnes of grain that could be used in the state. We are looking at alternative protein meals and protein sources that we can grow within Tasmania.
"The story goes on, as to how far the financial benefits spread throughout this community."
TasFoods has the option to acquire Nichols Poultry until 31 May 2016, which is likely to get extended up to 30 June 2016. Once exercised, the acquisition is bound to be completed within five working days.
On completion of the transaction, TasFoods plans to lease part of the land to Rob Nichols for grazing and cropping purposes for three years, and also plans to sign a grower's agreement with Rob Nichols to raise chickens for the Nichols Poultry business for a three-year period.
Nichols Poultry is a family run business which has been producing chickens in Tasmania since the mid 1980's.
The company claims to use European air chill processing technology, which was adopted instead of the American water chill method, which is commonly seen among Australian poultry producers.
The company states that it sources all grain locally, apart from the 6000 tons each year, using sustainable practices.
Image: TasFoods would purchase Nichols' poultry processing facility. Photo: Courtesy of Simon Howden/FreeDigitalPhotos.net.
