Gerry Harvey's foray into dairy farming has turned sour with Coomboona Holdings entering administration.
The Goulburn Valley dairy business was 49.9 per cent owned by a Harvey Norman (ASX: HVN) subsidiary and the company announced on Monday that Coomboona Holdings had gone into receivership on Friday evening.
In an ASX statement, the furniture and electronics retailer says the directors of Coomboona appointed Ferrier Hodgson as administrators of the dairy company and its subsidiaries.
Peter McKenzie Anderson, William James Harris and Matthew Wayne Caddy of McGrath Nicol have been appointed receivers by National Australia Bank.
Harvey Norman chairman and co-founder Gerry Harvey is also a director of Coomboona Holdings and in 2015 the retail giant paid $34 million for its stake in the dairy business with the aim of turning it into a major player in the industry.
In February, Harvey Norman wrote off $20.7 million against the dairy business in its half year results which weighed on the group's bottom line.
The half year results sent the company's share price plummeting to its biggest one day fall in 24 years of 14 per cent from $4.58 to $4.01 which wiped $700 million off the value of Harvey Norman.
When the half year results were revealed, Gerry Harvey said the write-off was not significant when compared to the size of the Harvey Norman business.
"Look, the situation was we invested in a dairy and it hasn't been a good result, but it doesn't even represent one per cent of Harvey Norman, so if you knock the share price down by $500m or $600m because of one per cent of half of one per cent, the logic just isn't there," he said at the time.
In its half year results, Harvey Norman said a dispute had developed between the company and the other owner of the Coomboona joint-venture, Eternal Sound.
The dispute included the future direction of Coomboona and Harvey Norman said it had demanded that the Coomboona joint-venture repay $18.5 million in debt to Harvey Norman.
At around 11.15am AEDT, HVN shares were trading at $3.63.
Business News Australia
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