Silver Fern Farms opposition shareholders set out vision

Wednesday 27th July 2016

The leaders of a group of Silver Fern Farm shareholders opposed to the sale of a controlling stake of NZ's largest meat processor to China's Shanghai Maling Aquarius for $261 million have set out a competing vision for the business ahead of a special meeting next month.

In an opinion piece released by PR company Bayly and Co, farmers John Shrimpton and Blair Gallagher argue they understand the business need to raise capital but state that "the critical question for shareholders comes down to this: do we actually need to sell control to raise what is required? Clearly, the answer is no."

They argue that SFF doesn't actually need $261 million, but that figure works for its lenders: "While that might work for our banks, shareholders should not be required to pay for that through the ultimate price of ceding control of our cooperative."

Instead, they make the case for a vote opposing the sale next month, with an independent assessment of capital requirements to follow. Alongside this, "all stakeholders, including our banks, should promptly engage to agree on the optimum, equitable way to raise the capital required and then executive swiftly."

Shareholders backed the sale of a controlling stake last year, with 82 percent supporting the proposal that would see the meat processor's assets poured into a new company half-owned by the Chinese firm in return for $261 million of cash to repay bank debt, a special dividend, and funds to bankroll the cooperative for seven years.

Eighty dissident shareholders led by Shrimpton and Gallagher object to that vote, saying it didn't classify the deal as a major transaction under company law, which is an agreement involving assets totalling half the value of a company.

Independent advisors to SFF, Grant Samuel said the Shanghai Maling deal didn't constitute a major transaction because "the aggregate market value of the gross assets transferred from SFF Co-Op to its subsidiary companies falls within the range of $200 million to $215 million," which is less than half the independent adviser's assessment of the meat processor's market value.

SFF's directors say they do not regard the outcome of the special meeting next month as binding. The sale has been bogged down awaiting approval from the Overseas Investment Office and completion has been pushed back to the end of September.

In an opinion article published by Fairfax Media on Tuesday, Lincoln University Professor of Agri-Food Systems Keith Woodford warned the deal was being closely watched in Beijing.

"If this deal falls over as a consequence of decisions made within New Zealand, then there will be implications for all New Zealand agribusiness industries." Woodford said, with the China-New Zealand business relationship currently "fragile".

BusinessDesk.co.nz

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