Investors took a dim view of yesterday’s surprise announcement that furniture and appliances retailer Harvey Norman (HVN) was moving into dairy farming and cattle breeding.
The shares fell more than 3% yesterday, to $4.17, which was a much deeper drop than small rise in the market by the close yesterday.
Harvey Norman told the market that it was paying $34 million for a stake in Coomboona Holdings, one of Australia’s largest dairy farms.
Harvey Norman said it had acquired a 49.9% stake in Coomboona Holdings for about $25 million and had agreed to lend just $9 million to the company.
Coomboona owns land and farm assets including dairy farms in the Coomboona district of the Goulburn Valley region in northern Victoria. It also operates a pedigree beef breeding and genetics business.
The news took investors by surprise, as it is so far away from the company’s retailing and property development core.
Harvey Norman’s co-founder and largest shareholder, Gerry Harvey, personally owns Australia’s largest thoroughbred sales company, Magic Millions, and has interests in beef cattle, fresh food and horse studs.
However, it is believed to be the first time that his publicly listed company has invested in the agriculture sector.
Some investors objected to the 8 line press statement sent to the ASX announcing the deal.
Others wondered about why an interest by Gerry Harvey personally in June in Coomboona, as reported in the media, has suddenly seen the retailer involved financially.
The deal came five days after Harvey Norman last Friday reported a higher dividend payout after lifting 2014-15 sales and annual net profit by 26.6% to $268.1 million, which was boosted by more than $22 million in property revaluations.
