KEY POINTS:
PPCS acted on professional advice when deciding not to sign a co-operation agreement with Alliance group, which on Friday effectively scuppered the meat mega merger.
In a letter to shareholders, PPCS chairman Eoin Garden said they were advised that proof of concept and a business case were "critical"
first steps before committing to a merger.
In a last-minute effort to broker a deal in talks on Friday, PPCS suggested Alliance make a takeover bid so PPCS shareholders could decide what the co-operative should do, an offer Garden said was not accepted.
PPCS also renewed an offer to Alliance, initially extended in December, to co-operate by toll processing livestock for each other, joint venture offshore marketing, integrated livestock transport and buying and selling arrangements for various products.
Garden said questions over the merger process and the decision to allow companies to withhold beef processing capacity from the merged entity led to the conclusion Alliance was imposing the co-operation agreement.
The PPCS letter also revealed Affco was considering excluding its beef business from the merged entity.
"It is important to understand that at no time was PPCS involved by Alliance in designing the AGL [Alliance Group Ltd] concept."
Alliance said last week that the concept would not progress any further.
However, yesterday Alliance said the PPCS letter contained many inaccuracies and had severely compromised the process and other parties involved.
"PPCS's unwillingness to enter a co-operation agreement with the other four major industry players is putting the proposal at risk," Alliance said.
"It's rationale for doing that has been the subject of a number of public statements and media releases by PPCS, which many will see as self serving."
In a blunt assessment of the failed merger plan, Garden said PPCS also had no influence on the shape of the final industry structure.
"PPCS is of the view that, for productive merger discussions to take place, parties should engage, discuss the principles and work through a programme to achieve the goals. The appointment of an appropriate person to lead this process would be valuable."
Alliance had forecast $400 million in gains from a mega merger, but Garden said those figures were never substantiated. PPCS yesterday revealed $259 million of those gains were estimated to flow from sheep meat markets, $40 million from market gains for beef and venison, and about $100 million from rationalisation.
But, Garden said allowing Anzco and Affco to keep their beef would require the company to maintain a head office, processing facilities and infrastructure which would reduce rationalisation benefits.
"The proposed mega-merger had effectively become a merger of PPCS and Alliance which would then look for opportunities to acquire certain assets from other meat industry players.
"In our view this was not an industry solution but a piecemeal acquisition model which was not what has been put before stakeholders to date."
PPCS on February 18 asked for a roadshow of the concept to be held for its shareholders, "and particularly North Island shareholders" to which it said Alliance did not respond.
MEGA MESS
* Alliance in February proposed creating a single entity to manage 80 per cent of sheepmeat supply and with similar amounts for beef and venison.
* The concept on Friday collapsed with a failure to get agreement from all five parties involved.
* Sticking points included the decision to allow companies to withhold beef processing capacity.
