Silver Fern Farms surprised many with its open letter to their and Alliance's shareholders, calling for a poll on industry restructuring.
It is disapointing that the two farmer owned cooperative boards are so far apart that one company has to ask for shareholders help.
An independently chaired committee with both boards expertise would surely lead to a better way forward, than the present " last man standing approach" which is failing this sector.
Better profitability will be the only way this industry will survive and now its up to the farmer shareholders to force their boards to get them to the table and make this happen. Their efforts may be pivotal in the future of the sheep and beef sector.
Silver Fern directors published an open letter in newspapers at the weekend to shareholders of both companies seeking their views on a joint investigation of the merits of a merger. Alliance chairman Owen Poole said the letter was published without his firm's knowledge and it did not have the board's support reports The Herald.
Poole said Silver Fern Farms had recently approached Alliance about a possible merger but the overture was rebuffed because it would not lead to wider industry aggregation. The country's other main meat companies, Affco and Anzco, had ruled out merging, he said. Silver Fern chairman Eoin Garden said the advertisement and accompanying poll gave the shareholders of both companies a say in the future direction of their companies and filled a leadership vacuum.
In the advertisement, Silver Fern asks shareholders if they want an independent facilitator appointed to chair a joint evaluation committee. That committee would create a strategic plan for the future of meat and meat byproducts with an agreed governance structure, and oversee an independent financial analysis of an amalgamation of the two companies with the report available to shareholders.
Poole said Alliance shareholders two years ago overwhelmingly rejected a merger proposal promoted by the farmer lobby group the Meat Industry Action Group. "Recently we had discussions with Silver Fern and their merger proposal falls well short of commercial and financial hurdles," he said.
Garden said the industry environment was quite different now from when attempts were made to bring the two companies together in 2007-08. "We have tried to re-engage Alliance, but they keep defaulting to the analysis of three to four years ago as opposed to re-evaluating the situation in the current supply, economic and global environment." Garden said if there was overwhelming support from the estimated 12,000 shareholders to evaluating a merger, then it was incumbent on the boards to listen.
And Alliances response also in the NZ Herald.
Alliance Group's shareholders will consider the potential for a merger with Silver Fern Farms at their annual meeting in December though chairman Owen Poole says such a deal lacks merit.
Poole said Silver Fern made an approach earlier this year and was rebuffed because "the risks exceeded the benefits."Silver Fern "were clearly miffed with that."
Alliance's main concern is that a merged company with 50 per cent of the market still wouldn't be large enough to change market behaviour "Under a merger proposal, AGL shareholders would be required to rationalize the industry's structural over-capacity which currently, is largely held by SFF," Poole said in the letter. He doubted there would be a definitive response from Alliance shareholders to Silver Fern's informal poll.
And the Governments comments in Stuff.
The Government is ready to help the meat industry consolidate, Agriculture Minister David Carter says. Speaking to Federated Farmers in Wellington yesterday, Mr Carter stopped short of supporting Silver Fern's move, but said there was a role for the Government to help smooth the way for greater consolidation of the industry. "But unless a groundswell comes from the shareholders there's little we can do to drive it," he said.
Funding help was unlikely but the Government was prepared to look at legislative changes to remove such obstacles as meeting Commerce Commission approval. "We are prepared to look at something, because we've got to find a way to restore profitability to the industry," Mr Carter said. "To me, it's a nonsense when you see your products selling for the highest prices ever in England and yet farmers are struggling."
Even if Silver Fern's attempt failed, consolidation was inevitable, but would happen over time. The present structure was established when national flock numbers were 70 million. Now they were at 32m. He dismissed the view that competition was good for the industry. "Where that competition does not work for you is when the companies fight against each other to get access to supermarkets in Britain and Europe."
2 Comments
I think SFF have a lot of debt,spreading it around by a merger creating what amounts to a monopoly makes it easier to pay back. Maybe the banks paid for the ad. My prediction is SFF are in it up to their eyeballs and the banks are unhappy, expect they will roll one day soon. This year will be bad because of low stock numbers. Desperate times down south require desperate actions. They are not getting my stock this year,or next,or next.
Interesting times for us sheep shaggers. Firstly the Wool Partners Co op and now a revisiting of the old chestnut of an Alliance/SFF merger.
Unfortuately for SFF the "Godfather" Owen Poole is seemly unmoved by their approach. He holds alot of sway with Alliance faithful.
SFF have reduced their debt significantly since the original overture but Alliance dont want to be involved in shareing the cost of taking out yet more capacity when they have been there done that twice in the past.
It seems a no brainer to me that the first step in industry rationalisation is a merger of the two southern co ops. Im an alliance shareholder/supplier, my nieghbours supply SFF, we are all in this together we, need to work together not in competition. I will be sending away my form in favour.
The real threat is a big overseas outfit like Brazils JBS who are now significant players in Aussie and rumoured to be bidding for Tegal chicken. We should unite our industry and retain control of our own destiny.
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