Shanghai Maling agrees to 3-month extension of $261M offer for half stake in Silver Fern

Friday 1st July 2016

China's Shanghai Maling Aquarius agreed to extend the deadline for conditions to be met for its $261 million offer to acquire a half stake in Silver Fern Farms, New Zealand's largest meat processor, giving the Overseas Investment Office more time to assess the deal.

Under the conditions of the original deal, the transaction was slated to go unconditional by June 30, but Silver Fern and Shanghai Maling have agreed in principle and subject to respective board approvals to a revised date of Sept. 30, Silver Fern said in a statement today. The Dunedin-based meat company also set a new date of Aug. 12 for a special meeting for a second vote on the sale, which was requested by a group of dissident shareholders and originally set down for July 11.

The OIO received the application from Shanghai Maling on Oct. 16 last year and accepted it for assessment on Oct. 23. The assessment period of 70 working days has taken longer than expected as officials "stop the clock" when they ask an applicant for more information. Regular timetable blowouts caused by applications generating numerous information requests have led to complaints from foreign investors and their New Zealand advisers.

“We needed to allow more time to answer the further information requests from the OIO and to then provide sufficient time for the OIO and then Ministers to consider the application," Silver Fern chief executive Dean Hamilton said in the statement. "The agreement to the new date reflects positively on the ongoing commitment of both parties to the transaction. We continue to believe that the investment will be approved given its substantial merits."

The deal would enable Silver Fern to repay its debt, removing a threat from its banking syndicate to withdraw support. It would also enable it to tap Shanghai Maling's supply chain and parent Bright Food's wholesale and retail networks to distribute into China, allowing Silver Fern to ramp up its product development and consumer marketing.

Land Information and Associate Finance Ministers Louise Upston and Paula Bennett will make a final decision on the deal. The pair turned down an application last year by Chinese investor Shanghai Pengxin to buy the iconic Lochinver Station, a central North Island property.

The latest deal is already contentious because some owner-farmers of the cooperative have opposed both the outcome and the process, and have gained political backing from NZ First leader Winston Peters. John Shrimpton and Blair Gallagher, representing a group of 80 Silver Fern shareholders, have forced the company to hold the special shareholders' meeting in an attempt to scuttle the deal, which gained 82.2 percent support from farmer shareholders at a vote last October. Silver Fern directors have said they intend to go ahead with the deal irrespective of the outcome.

Both the Financial Markets Authority and Companies Office haven't found any fault with the actions of the Silver Fern board.

"It remains in the best interests of shareholders and the cooperative, it is a significant opportunity for our farmer shareholders to create an improved future, and we intend to follow their direction and complete the transaction in accordance with the revised timetable,” Hamilton said today.

Silver Fern and Shanghai Maling have agreed to a Jan. 4, 2017, completion date for the deal to align with a new balance date for Silver Fern and the new financial year of Shanghai Maling.

BusinessDesk.co.nz

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