Silver Fern told to take another look at reform in meat sector

Silver Fern has asked Goldman Sachs for advice on equity raising as it seeks to reduce debt. Photo / NZME.

Shareholders push for special meeting to get co-op to revisit study on industry restructure.

Farmer shareholders of Dunedin-based Silver Fern Farms say they are close to achieving a 5 per cent voting threshold required to call a special meeting to get the company to take another look at meat industry reform before it scouts around for fresh capital.

Their moves come at a time of unrest in the meat sector as it struggles to deal with issues of overcapacity and stock procurement, as well as an unexpected decline in sheep meat prices.

Silver Fern, New Zealand's biggest meat company, has enlisted the services of investment bank Goldman Sachs to advise it on possible equity raising options as it seeks to reduce debt. A decision on the co-op's likely course of action is expected around July-August.

Farmers Allan Richardson, from Heriot, and John Cochrane, from Clinton, said they were close to achieving the 5 per cent shareholder support necessary to call the meeting.

They want the Silver Fern board to look again at a report from Meat Industry Excellence (MIE), which was aimed at getting the disparate groups in the sector to join forces.

Richardson said farmers felt that both Silver Fern and its Invercargill-based rival, Alliance Group, had not given the MIE report its due.

"They kicked it into touch and carried on with their day-to-day business," Richardson said. "I think it deserved a better hearing than that, especially in a year when many farmers - especially sheep farmers - are struggling."

The report said savings of $100 million a year were possible if Alliance Group and Silver Fern started working together rather than competing against each other.

"For me, that is pivotal," Richardson said. "We certainly need to debate that. With potentially $100 million in savings at stake, you'd think they would have at least considered it."

Richardson said farmers were uneasy about the prospect of a capital raising.

"Foreign investment is fine, but there is always going to be a catch with it. If it impacts on the ownership status of the co-op, there is no turning back from that."

Farmers, while not totally opposed to the idea of fresh capital coming into Silver Fern Farms, were nervous about the prospect of foreign investment in the co-operative, he said.

Silver Fern has 104 million shares on issue - held throughout the country but mostly in Otago, Southland and Canterbury.

Early this month, meat processors knocked back a Beef and Lamb New Zealand proposal for a joint market development model, preferring to go it alone rather than act jointly.

"At the last hurdle it was not supported jointly or individually, and the view of the majority of the companies concerned was that they believed they could get a better return on their investment by building their own brands," said Beef and Lamb chairman James Parsons.

Farmers will be asked at Beef and Lamb's annual meeting in March how they want the organisation - which farmers fund to generically market New Zealand beef and lamb - to proceed.

In March, Silver Fern Farms chairman Rob Hewett said that rationalisation of the New Zealand meat industry could take place through collaboration in processing and freight, rather than through mergers and acquisitions.

Hewett said Silver Fern was broadly "in alignment" with MIE, but added that the suggestion the sector adopt a Fonterra-type structure was too simplistic.

Silver Fern Farms

• New Zealand's biggest meat processor.
• Exports lamb, beef, venison to 60 countries.
• Comprises 16,000 sheep, cattle and deer farmer shareholders.
• Owns, operates 21 processing sites.
• Employs 7000 staff at peak season.