Silver Fern seeks new capital in restructure

Silver Fern Farms chairman Eoin Garden. Photo / Simon Baker

Up to 40 per cent of shares in Silver Fern Farms could be traded on the Unlisted market in new capital restructuring plans for the meat processor and marketer announced yesterday.

The plans could raise as much as $128 million in new capital.

Controls would be put in place to ensure supplier shareholders always owned 60 per cent of voting rights and single shareholders or groups of associated shareholders would be limited to 5 per cent of the total issued capital.

Silver Fern Farms chairman Eoin Garden was confident of getting shareholder support, but said the restructuring package was also a vote by shareholders whether they wanted the meat industry to change from being production driven to market-led.

He said the near-doubling of lamb prices this season was due to a worldwide shortage and a more favourable exchange rate and not because of structural changes to the industry.

The status quo or this restructuring package were the only options for the company's 20,000 shareholders to consider, he said.

"We're not talking alternatives, this is the only proposition. The only alternative is do nothing and that is not an option for the industry."

Garden said the new capital was needed to support strategic initiatives, including the international rollout of Silver Fern branded meat products - part of its plate-to-pasture integrated supply chain, and to strengthen its balance sheet.

Chief executive Keith Cooper said that through rights issues, the company could conceivably raise $128 million in fresh capital, but farmers had had a couple of tough years and he did not expect a full takeup. "If we get less than $80 million, so be it."

The company was forced to turn to supplier shareholders for capital after the failure last year of the partnership with rural servicing company PGG Wrightson.

Silver Fern was then independently valued at $440 million, but ABN Amro Craigs broker Peter McIntyre said the paying of debt and the dilutionary effect of increasing the number of shares could revalue Silver Fern at between $375 million and $400 million.

Total assets, according to last year's annual report, were $690 million.

McIntyre described Silver Fern's timing as "immaculate" as sheep and beef farmers were having a profitable season.

Garden said that while retaining the core co-operative principles of farmer control, the new structure would inject capital, provide transparent market-based share value from trading on the Unlisted market, reduce redemption risk and allow shareholders to access the full value of the company.

A new board was being finalised but he said this was not being pre-emptive as details had to be prepared for shareholders on what the new structure would look like.

He believed Silver Fern would get the 75 per cent support needed for the changes.

FORGING SILVER

Silver Fern Farms capital restructuring plans:

* Suppliers to hold minimum of 60 per cent of voting rights.
* Balance may be traded on the Unlisted market.
* Participating farmers would be able to subscribe for up to two $1 shares for each of the shares they already hold.
* Single shareholders or groups of associated shareholders limited to 5 per cent of total issued capital.
* Company's 20,000 shareholders to vote on July 30.
* Needs the support of 75 per cent of eligible voting shareholders to proceed.

- OTAGO DAILY TIMES