Meat industry shareholder groups merge to push their case for reform

Tuesday 18th August 2015

The two shareholder groups representing Silver Fern Farms and Alliance farmers have joined forces in a bid to encourage the two meat cooperatives to follow suit and work collaboratively.

Each shareholder group has separately gained the 5 percent farmer support needed to call special meetings of their respective cooperatives to try and force the boards to investigate the benefits and risks of a merger, though dates have not yet been set for either.

Alliance shareholder Jeff Grant said it is best to wait on the outcome of Silver Fern Farm’s current capital raising before holding either meeting.

“If the capital raise changes the structure of the cooperative to be a non cooperative or in foreign ownership then it would be pointless having an SGM (special general meeting) at all,” he said.

Silver Fern Farms suspended trading of its shares on the Unlisted exchange in late July while it tried to raise $100 million of new capital through investment bank Goldman Sachs. The company said today the capital raise process is continuing though it’s understood from meat industry sources an announcement could emerge by the end of the week.

Grant said it seemed sensible to hold the Silver Fern Farms meeting first, followed by the Alliance one. He said the SFF board had indicated this will likely mean the SGMs will be held in late September or October but the timing is ultimately in the hands of the cooperative boards.

Silver Fern Farms shareholder Allan Richardson said there remains an opportunity for the two groups to work together over the next couple of months to continue encouraging the two cooperatives to find a pathway forward for farmer shareholders which will give some confidence in the industry.

Grant said the farmer feedback is that they want the two cooperative chairmen to take a leadership role and agree in principle to consider strengthening their commercial relationship.

“In the end farmer shareholders have nowhere else to go to shape their industry. They have no ownership of the industry beyond the farmgate other than the farmer co-ops. The rest of the industry belongs to family corporates and commercial corporates who rightly will want to shape their own destiny,” he said.

The response from Alliance, the world’s largest processor and exporter of sheepmeat, has been to write to its 5,000 shareholders saying it had been a difficult year for them and the board was working on a strategy to improve shareholder returns.

Chairman Murray Taggart has said any special general meeting would be limited to considering the resolution that the board provide shareholders with a full analysis of the potential benefits and risks of an Alliance/SFF merger.

Even if the resolutions are passed, they are not binding on the meat processors’ boards.

Both Taggart and the SFF management have had recent meetings with meat industry reform group Meat Industry Excellence, which is pushing its plan for a new export meat cooperative that would park the debts of the two farmer-owned co-ops into a ‘bad bank’ and the good equity into a ‘good bank’.

MIE spokesman John McCarthy said they now had a better understanding of each company’s position but SFF was hamstrung by the current capital raising while Alliance has no interest in industry merger.

The MIE proposal was not dead in the water as they would continue to engage with the shareholder groups pushing for reform, he said

McCarthy blamed Agriculture Minister Nathan Guy for failing to take a strong stance on the need for change.

“Nathan Guy will go down in history as not being a strong leader for the agriculture sector. He’s been missing in action on meat industry reform,” he said.

BusinessDesk.co.nz

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