Here's Silver Fern Farms' announcement;
SILVER FERN FARMS BOARD UNANIMOUSLY RECOMMENDS PARTNERSHIP WITH SHANGHAI MALING
· Board gives unanimous recommendation to accept Shanghai Maling Aquarius Group (Shanghai Maling) as new partner to secure an improved and sustainable future
· A 50:50 partnership with total commitment to our global plate to pasture strategy
· Transaction values Silver Fern Farms’ equity at $311m. This equates to $2.84 per ordinary share, which compares to the $0.35 share price prior to their suspension in July
· Shanghai Maling to invest $261m in cash to own 50% of Silver Fern Farms’ business, in partnership with the existing Silver Fern Farms Co-operative
· A special dividend of $0.30 per share to Co-operative ordinary and rebate shareholders
· The investment will see the company with no debt and a positive cash position at next year end
· Provides Silver Fern Farms with significant financial capability to accelerate its global ‘Plate to Pasture’ strategy, and to invest in improvements to its plant network.
· Positions Silver Fern Farms with a competitive advantage in China; the world’s fastest growing red meat market
· Creates New Zealand’s financially strongest red meat processing company
· Retains the supplier-controlled co-operative as a 50% shareholder
Dunedin, 15 September 2015 – The Board of Silver Fern Farms announced today that it will recommend unanimously to its shareholders that a partnership is formed with China’s leading meat processor Shanghai Maling, a listed company based in Shanghai, owned 38% by Bright Food Group.
Rob Hewett, Chairman of Silver Fern Farms, said the Board’s recommendation to co-operative shareholders is to create a new 50 / 50 partnership with Shanghai Maling and to work together to grow a profitable long-term global business providing sustainable returns to shareholders.
“Under the proposed deal Shanghai Maling will invest $261 million in cash for half of Silver Fern Farms’ business. The investment will be into a company, to be named Silver Fern Farms, which will own all of the assets of the business, and be owned 50 percent by the existing Silver Fern Farms Co-operative and 50 percent by Shanghai Maling. In addition, the Board of the Co-operative plans to redeem the 5.5m Supplier Investment Shares it has outstanding and pay a $35m (30cps) special dividend to ordinary and rebate shareholders at the time of the transaction. This dividend will be a welcome return and one which will set expectations moving forward.”
“Existing ordinary and rebate shareholders will retain their current shares in the Co-operative and supplier shareholders will continue to supply their livestock through the Co-operative,” said Mr Hewett.
Mr Hewett adds that by Shanghai Maling investing $261 million of cash into the business in return for 50%, the Co-operative will own 50% of a business whose equity value has effectively doubled in size.
“The implied value of the transaction of $2.84 per ordinary share compares to a share price of 35 cents when the trading of shares was suspended in July.”
Mr Hewett notes that the intention going forward, subject to board approval at the time, is for Silver Fern Farms to return 50% of profits every year to its two shareholders.
“The Board considered many options for new capital, both locally and internationally, but Shanghai Maling stood out for the enormous opportunities and ongoing benefits for the Co-operative, its shareholders and supplying farmers.
“We are very excited by this partnership proposal with Shanghai Maling and believe they are the best partner for Silver Fern Farms. Our values are closely aligned. The proposed deal has many long-term benefits for the co-operative including full support for our global ‘Plate to Pasture’ strategy, and the means to accelerate the strategy in a number of key markets as a result of the investment of substantial new capital.
“This new partnership will see Silver Fern Farms in a cash positive position at year end, which will allow us to both reinvest more aggressively in executing our strategy but also to share profits via regular payments of dividends to the two shareholders and maintain competitive procurement prices for our livestock suppliers.
“The Co-operative will receive 50% of those future dividends and intends, subject to the Co-operative Board approval at the time, to in turn provide regular payments of dividends and rebates to shareholders.”
Dean Hamilton, Chief Executive, Silver Fern Farms said Shanghai Maling brings more than just capital because they provide the co-operative with a huge opportunity in China.
“This has the potential for us to establish a unique position in what is the fastest growing red meat market in the world. Shanghai Maling’s integrated supply chain model will allow us to advance our product development and consumer marketing abilities in that market in ways we could not do ourselves, or with any other local or international investor,” said Hamilton.
“Silver Fern Farms will continue to be responsible for its sales and marketing efforts in China just as it is in other countries around the world. Where it makes sense for all parties, we will be working with Shanghai Maling to create products in New Zealand specifically for China, and will leverage its (and Bright Group’s) significant wholesale and retail networks. We expect the in-market relationship to build naturally over time,” he said.
Mr Hewett said shareholders and suppliers will have the opportunity to hear more about the partnership over coming weeks.
“We expect to send shareholder materials out ahead of a shareholder meeting planned for October 16. The investment is subject to shareholder approval by both parties and regulatory approvals in both New Zealand and China. We expect the transaction to be completed in the first half of next year.
“What is clear is that the traditional industry model hasn’t consistently delivered for farmers or processors over a sustained period of time. Our shareholders and farmer suppliers believe in our added value strategy, but the key missing link has been a strong financial position from which to execute.
“We have arrived at a position where we have a genuine game changing opportunity for our business. We have a partner who supports our strategy, wants us to accelerate, has the resources and relationships to help us specifically in China, and will provide us with significant capital to put us in a position of not only financial sustainability, but one of strength. It will enable us to reinvest in the business in a manner we simply cannot achieve by ourselves. The end result should be higher, and more stable, returns from the plate to the pasture.
“We are excited about what this partnership can bring to the business, to our shareholders and to supplying farmers.
“I truly believe this partnership will be a defining moment for our business and the co-operative as a whole. We will look back on this in 5 to 10 years’ time and know it was the catalyst for us to propel our business forward in a way, even a year ago, we never thought possible,” Mr Hewett said.
About Silver Fern Farms:
- Silver Fern Farms is a major New Zealand processor and marketer of lamb, mutton, beef, venison and associated products to more than 60 countries
- The company’s vision: Inspirational Food Created by Passionate People
- Silver Fern Farms is a farmer-controlled co-operative with more than 6,200 Ordinary Shareholders and over 16,000 farmer partners
- The company operates 19 processing facilities throughout the country, employing more than 7,000 staff in peak season
- Key markets in North America, China, the Middle East, Europe, the United Kingdom and Asia are supported through a network of international offices.
About Shanghai Mailing Aquarius Co., Ltd
- With a history of over 100 years, the current entity of Shanghai Maling Aquarius Co. Ltd (“Shanghai Maling”) was founded in 1997
- As a listed subsidiary of Bright Food (Group) Co. Ltd, Shanghai Maling is a leader in integrated food manufacturing, food processing and distribution.
- Shanghai Maling is a leader in the Chinese market in the following sectors; chilled & fresh meat, beef value-added, candy and bottled honey.
- Shanghai Maling has direct control of 800 supermarket and retail stores, including 56 specialist meat retail stores in Shanghai
- Their meat sales network covers large to medium sized cities in Shanghai and other Chinese Provinces: 19 wholesale facilities, distributing more than 2,000 SKU
- Large e-commerce presence: “96,858” online-supermarket and online stores in most Chinese online shopping websites
- Shanghai Maling consists of 3 business divisions:
1. Meat & Meat Products (Beef \Pork\Lamb）
2. Integrated Food Manufacturing · Chocolate Candy · Honey · Seasonal Food (e.g. Moon Cake) · Drinking Water
3. Food Distribution · E-commerce & Food Distribution · Food Imports and Exports
- Market cap: NZD 3.2 billion (19 August 2015, at suspension of trading)
- 2014 full year results:
Total assets: NZD 1.65bn
Revenue : NZD $2.65bn
1 New Zealand Dollar equals 4.0 Chinese Yuan
About Bright Food Group
- Founded in August 2006, Bright Food (Group) Co., Ltd. (referred to as “Bright Food”) is a multinational food and beverage manufacturing company headquartered in Shanghai, China. It is the largest China-based food manufacturing company and is owned by the Shanghai Government
- Bright Food has four listed subsidiaries (Bright Dairy & Food Co., Ltd., Shanghai First Provisions Store Co., Ltd., Shanghai Maling Aquarius Co., Ltd. and Shanghai Haibo Co., Ltd)
- Bright Food either directly or through its subsidiaries manages 800 Hyper Market and 8,000 retail stores in total across China. In addition, it currently supplies product through its distribution network to over 60,000 third party supermarkets and stores throughout China
- Bright Food collaborates with a number of major global retailers in China including Tesco China, Carrefour China, Walmart China and Bailian Group.
60 Comments
"上海梅林正广和股份有限公司" -- http://www.shanghaimaling.com/ .
At least, this company has a lot longer history (over 100 yrs) than Beingmate does.
Also, by looking at the company website, it specializes in producing canned (marinated, cooked) meat as oppose to fresh cuts. It may make SF's already excess capacity appear more excessive.
So,.....
Absolute bloody disaster, peasants in our own land stuff! Once we lose the value chain to market we will be consigned to the fate of log and wool exporters, becoming producers of the raw commodity further processed offshore. That the govt does not see this is unbelievable especially given the jobs that are at risk in the regions. I wouldn't rule out farmers rejecting this just yet, we farmers have a healthy suspicion of strangers bearing gifts.
"China does not currently have a monopoly, nor 90%, of the supply of rare earths. 60 Minutes is also wrong on the geology and metallurgy of the rare earths. We do not need to have mines to produce them, we can extract from other minerals that we already process.
...even if you do want to insist that the US must have its own supply chain, from hole in the ground to jet flying through the sky, this is a relatively cheap, almost trivial, problem to solve. It doesn’t require hundreds of millions, nor the bailing out of a failing mine, to achieve the goal. As an example, and as above, Lifton, I, a number of other people, could organise the supply of that essential yttrium for the F-35 for a couple of million dollars a year. And at that price we’d probably be getting ourselves a new Rolls Royce each year too (the car, not the jet engine). But why on Earth would anyone want to pay us to do that when you can go out into the market and buy the necessary material for perhaps $160,000 a year?"
http://www.forbes.com/sites/timworstall/2015/03/23/what-60-minutes-got-…
Thanks - it's a long haul back to equilibrium - Gross external debt - debt fueled record car imports are not part of the solution.
'to accelerate its global ‘Plate to Pasture’ strategy,'
I think a pasture to Plate Strategy sounds better or am I missing something?
So Bright Foods is owned by the Government of Shanghai is this the Shanghai Municipal People's Government?
Some government officials in Shanghai will control Sliver Ferns farms for as long as they remain in power. That will be interesting
Now then James.....
It’s the same with all the other great nations – Chinese, Russia, German, English. It’s their bones that matter, not their lying faces. And all those races have got tremendous bones. Compared with the bones, the smiles or scowls don’t mean a thing. And time means nothing for them either. Ten years is the blink of a star for the big ones. Get me? …… I suppose, ……. [they] will look at your proposition principally from two angles, Is it immediately desirable, today? Or is it a long-term investment? Something that may pay off for the country in ten, twenty years…… These people, …. , don’t think in terms of days, months or years. They think in terms of centuries. Quite right, when you come to think of it…
Dikko Henderson
Chapter 3: Dikko on the Ginza
Ian Fleming 1964
https://en.wikipedia.org/wiki/You_Only_Live_Twice_(novel)
Now I am going to inform you exactly what pasture to plate means and the term is actually pasture to plate CONTROL. Control is what it is all about, and it is about eliminating the need for third parties (for third parties you can read NZ). Pasture to plate means that little or no profit may be shown in NZ all of that showing up in China once the money has probably been filtered through a British Virgin Islands account. What I have written there is pretty much what I read on, if I recall, Shanghai Pengxin's website, although I cannot remember whether BVIs were actually mentioned there but the rest was.
Pasture to plate is absolutely about taking control of OUR industries.
You seem pretty confused about this. SFF has a 'Plate to Pasture' strategy, not a 'Pasture to Plate' strategy. It's about customer-led signals, not production-led signals. Their marketing approach is on the right track.
What you seem to be objecting to is something they are not doing. You also seem to be confusing politics with marketing strategy. Odd.
How can I possibly confuse politics with marketing strategy when the new "partner" for SFF is the Chinese Communist Party or if you prefer, the Chinese government. Seems they are all mixed up to me. Whatever the initial plan might be, I am positive that the ultimate aim will be exactly what I just described.
What is this business with the blindness to what is happening?
Good points 'don'tgetmegoing'.
What do consumers look for in plate to pasture strategy David? Good quality, good value (cheap) product, or good quality expensive product. Presuming consumers want to pay a premium for good quality product, what value will NZ meat producers receive verses offshore investors, if they don't own the company (value chain)?
Here's a statement from Labour's Grant Robertson;
The sale of half of Silver Fern Farms to a subsidiary of China’s Bright Foods is a result of National’s failure to reform the red meat industry despite years of decline, Labour’s Finance spokesperson Grant Robertson says.
“National had seven years to consider various proposals to reform the red meat sector to be more productive and competitive overseas. They’ve done nothing, standing by while the industry became less profitable and productive.
“The biggest concern about the Silver Fern sale is that much of the production chain for red meat is going into offshore hands, along with the profits. New Zealand is missing out, and with the current overseas investment rules there is no guarantee that this will be the kind of foreign investment that is good for our country.
“There must be a clear plan for the use of that investment to improve plant, boost productivity and create opportunities for New Zealand workers. This would mean changing criteria in the Overseas Investment Act and giving the Overseas Investment Office the resources to investigate whether commitments made by foreign investors are being met.
“Our red meat sector should be able to stand on its own two feet, without the need for foreign capital if it’s structured properly. National’s neglect of the regions has left one of our biggest industries facing uncertainty,” Grant Robertson says.
Speak for yourself. If your parents, grandparents, great grand parents and great great grand parents were all born in NZ, it's pretty hard to feel imported.
For me on most lines, I'm generation five born here, with up to 7 generations back living or buried here. (Like most people I grew up with here in the south).
I dont and never have loved Margaret Thatcher. The choice at the time was vote for her or Michael Foot/Arthur Scargill, I chose the least worse by far.
"a deplorable human rights record and expansionary geopolitical ambitions." maybe you want to study the history of the British Empire before you dig in too deep. "we whities" were hardly nice to Maori or indeed any others in the past as we invaded other countries in search of wealth.
Just who is selling the 50% stake? why some NZers, so they can take in some "profit' nothing really to do with those in "power" but NZers making their own decisions.
but is it a strategic asset? if so how?
My apologies steven, I concede that my intemperate outburst can be interpreted as insulting, though I would beg to differ that any other politician would have been worse than Margaret Thatcher, when under her reign Britain was dragged into a war over a scattering of utterly worthless islands on the other side of the world, the British industrial base was gutted and displaced with a predatory financial industry, whose reckless behaviour almost led to the collapse of the world's economy, she dismantled vital support structures for the most vulnerable people in Britain and led to the immiseration of generations of Britons and Scots with the misfortune of not being born in the commuter towns of the Southwest with easy access to the financial hub of the City of London and Canary Warf. Even today Britain's economic performance is highly dependent on the financial industry.
"TheCityUK has revealed that employment in the financial and related professional services industry is at its highest level since the outset of the financial crisis in 2008.
The group said that the 2.1 million people now working in the industry across the nation are also around 80% more productive than other sectors in the UK.
According TheCityUK data, the average worker in financial and related professional services contributes £85,000 to the UK economy per year, which is nearly nearly double that of the £47,000 contributed by the average worker in other sectors."
http://www.ibtimes.co.uk/uk-finance-industry-has-highest-number-workers…
In no manner can this sale be considered a success for the company, its farmer shareholders or the country. It is a result of failure and it will remain a symbol of failure.
Perhaps owners and managers of other New Zealand companies might look ahead to structures that allow capital raising within New Zealand (and better thought-out than Fonterra's arrangements), rather than heading off into the sunset in their own flimsy, leaky boats. Farmer shareholders might not have the money, but there are plenty of New Zealand investors, who care for this country and our nation, looking for holdings in viable New Zealand businesses.
Sure, SFF has been rescued from drowning, but it has as good as been picked up by a pirate fishing ship.
What some appear to have missed is the equal partnership structure of this deal. It appears to me what SFF has done is swapped debt for equity at no cost, and in fact significant benefit to shareholders with an increase in share value and dividend. Sir Ron Trotter once quoted there should only be one partnership, a 50:50 one, as has been done here, as both parties must make decisions to make progress.
I did such a deal in my farming career, swapping my bank debt for a 50:50 partnership with an outside partner and this deal opened all sorts of farming opportunities (development and neighbouring farm purchases) that would not have been achievable in the previous ownership structure, and believe this will be the case with SFF.
From my research none of the other offers was as attractive as the one decided upon, and I applaud SFF directors for their courage and vision, and believe this will be a much needed game breaker for the future of the red meat sector.
50-50 partnerships, Tony, are inherently and necessarily unstable. Companies enter 50-50 ventures because they can't do otherwise for a time, and the arrangements last until the stronger partner gains the upper hand. A 50-50 agreement merely parks this outcome for a while. And who, would you say, is the stronger partner here?
can someone correct me here? Will there will be one 50% partner (Chinese) and a multtitude of other current sharholders making up the local component?
So do we have one massively dominant partner and a sprinking of locals? Thsi being the case, this could hardly be called a 50/50 partneship?
Please tell me i'm wrong..
It could be OK but like all partnerships at the end of the day it comes down to the goodwill and integrity of the parties involved. I have seen 50:50 partners absolutely screw a company. One partner had a set of vested interest in one aspect of the company and the other partner a set of vested interests in another aspect. They each pressured the company to maximize their vested interest without any care for the well being of the other partner or the poor old company itself. Running businesses under those circumstances is pretty dismal and they slowly die. I have seen it a number of times. Having said that I have also seen equal partnerships work exceptionally well. The ground rules and aligning interests at set up is pretty important.
I agree Xingmowang and I can say that it has been like this for many decades!!
Personally I blame employment law.......if someone is not doing a good job you cannot get rid of them.....the business loses out as it cannot make the right headway and the employee loses out as they are denied the experience of learning from their mistake and errors.......the threat of dismissal is a great tool to obtaining better/improved performance.....liken it to the loss of a contract to supply goods and services......which is a real threat to any business at any time.
What has employment law got to do with lack of market research? can you explain how you link the two?
In terms of sacking ppl there is a balancing act between the rights of the 2 people. So the employer has to prove the employee is incompetent and not just that the employer no longer needs someone or doesnt like them, I see this a reasonable. On top of that there is also just what is the definition of a good job? some employers I have come across define that as paying for 40hours per week but expect 50+ for free.
The threat of dismissal is not a great tool IMHO, its a whip that can be used by a bad employer on the desperate to get an un-economic return.
I know you don't get it Steven and that you lack any expertise in business so will find it difficult to comprehend how it the system is integrated between specific jobs/employment and sales.......
Do you honestly think that bad employers can last in any market for long periods of time.......employees will soon jump ship from bad employers and that is how the free market is meant to work......sorts the wheat from the chaff.
There is also difference between turning up for 40 hours per week and working for 40 hours per week!!
No I dont get your thought process(es) which time and time again just seem weird. ie you take a general statement on lack of marketting research and then try to claim it is a logical extension too hard to sack someone. a) the first on lack of marketing research is a macro view ie commenting on an industry / sector failing as opposed to a micro view of some employees v employers.
Yes I do think bad employers can and do exist and continue to exist, they do so by extracting beyond a fair return for the payment. Skilled employees do indeed jump ship once there is another job. On the other hand un-skilled and where work is very scarce means few options and that can be and has been abused, been there and seen the above situations enough.
I wonder how a sale like this could potentially clash with our laws protecting competition. My problem with it is not that it is a foreign sale but a sale to a company owned by a foreign government. As I understand this sale wouldn't be allowed in Austrailia for that reason? ( correct me if i am wrong). In world full of Zombie banks and rigged markets all we need is a communist take over of the meat industry. They can just crank up the printing presses and print off a couple of hundred million as they please. ( good luck for the competition if it goes through). Why can't they sell it to a genuine foreign company? Because it's not viable unless you are a Zombie company with plenty of funny money. Will we see $200 lambs, sheep farms doubling in value, debt sky rocketing followed by mortgagee sales, sound familiar? When will the world get back to reality? We seem to have a government that is encouraging chaos.
There was also an occasion in the US, in 2005, a Chinese Govt owned company CNOOC tried to buy an American energy company UNOCOL the US government blocked the sale on similar grounds
https://en.wikipedia.org/wiki/China_National_Offshore_Oil_Corporation
50:50 partnerships seldom work. Eventually the partners' ambitions will diverge, there will be no mechanism to cover this eventuality, and it will end up in acrimony when net cashflow turns negative.
The CNI Forest Partnership between Fletcher Challenge and CITEC springs to mind as an example.
As a SFF supplier shareholder I congratulate the board for the deal they have brought to the table.
The current model of capital constrained company's competing for an ever diminishing lamb supply has demonstrably been shown not to work. The big prize for farmers is in the marketplace with highend consumer savy cuts that deliver on the promise of a great eating experience. Selling legs of lamb via loss leading supermarket promotion is not a long-term sustainable option.
This deal appears to be a real circuit breaker, not only swapping debt for equity but gaining a vertically integrated partner motivated to make it work. They soon will have skin in the game.
For those not wishing to slaughter the sacred cow of NZ ownership, they can shift supply to Alliance.
Without this deal the move away from sheep will increase along with the environmental impact of cattle.
Its like giving smelling salts to a punch-drunk heavy-weight just before the inevitable knock-out,
nothing more in its current state.
You are right about selling to supermarkets who in return control price and volume.
With respect to others the paddock to plate "model" has been tried since the 80's in various OECD countries, and been unable to work on any scale.
There are an enormous number of people who intensely dislike the co-operative models that NZ is well known for!!
It has long been desired by many on the outside that these co-operatives be dismantled. So who has been pushing their agenda on the Board members? MPI? MBIE? The Chinese buyer? PRC? NZ Politicians? Someone has been doing a lot of leaning.....so what are they getting out of this??
The Board of Silver Fern Farms have sneakily run off to China behind the shareholder owners backs to push for a deal of which they are now putting on the table....... this deal lacks in transparency and democracy from the get-go.......a transparent and democratic process would have put the issue of part-sale to the existing shareholders for consideration prior to finding a buyer not after finding a buyer.......you are on watch you sneaky sods titled Board members!!!
The majority of NZ business cannot compete with countries like China as they do not have all the rules, regulations, compliance that we have enforced upon us in NZ.......and it is time NZ'ers woke up to the fact that Nanny State NZ is not working and it is a shame those Board members didn't bring these issues to the Governments attention and keep bringing these issues to their attention!!!.....what are we going to have - whole carcasses leaving NZ to be further processed in China where it is cheaper and a lower regulatory environment? People should be asking WHY NZ is so uncompetitive????
The BS is that NZ'ers demand all these rules, regulation and compliance from NZ businesses putting all the costs up while consuming crap from other countries with few rules, regulations and compliance!!!
"The BS is that NZ'ers " LOL, totally agree with this paragraph. Hence one of the reasons I try and buy NZ products and avoid chinese products, food in particular. As a slight aside some estimates I have seen is that China's so called 10% per annum growth has 50% of that due to environmental degradation, ie when you factor in the RMA effects they dont pay their great growth falls to more like 5% per annum fairly close to our "ideal" 4%.
Your meat company has to have a mission statement to try and improve value for the farmer or else there will be be no industry, simple as that. If SFF farms starts a procurement war no one will win. It's alot of the reason the meat industry is in the state it is in now because it has all happened before. Most farmers will keep supplying the same company they all ways have. SFF has dragged the chain for years on price paid to farmers. The NZ meat industry is a very tough one to survive in. I know the Chinese are clever, but it will be interesting how this all pans out for them.
Lochinver and Silver Fern Farms - what we didn't know
An essential strategic examination of the two deals by Rod Oram at Radio National
Lochinver
Part of the land holdings was the product of a Government Land Grant to Stevensons 50 years ago
Silver Fern Farms
Shanghai Maling retains the right to appoint CEO with control over the budget and veto powers over decisions, explains vertical integration and where the value is captured. Shanghai Mailing controls 600 supermarkets while Bright Foods controls 800 hypermarkets, and finally the power to destroy Alliance
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