In a sign the quarrelsome meat industry is maturing, two major processors, Greenlea and Wilson Hellaby, and a third company have teamed up to buy the skin and hides business of the Wallace Group.
Hamilton-headquartered Greenlea Premier Meats and Auckland-based Wilson Hellaby have collaborated with Glendenburg Holdings to acquire from today the Wallace tannery, rendering and composting operations at Waitoa, near Morrinsville, and Northland and Feilding.
Greenlea and Wilson Hellaby will own jointly own the hides and skins operation to be known as Waitoa Tannery, while the new rendering business, Waitoa Proteins, will be owned by experienced operators Glenn Smith and Steve Dahlenburg.
All three will share ownership of the operation's composting and site services.
The deal, understood to be worth well over $10 million, preserves the jobs of about 100 workers across the three sites.
The business was established in 1992 by Sir James Wallace, and the seller Wallace Group Ltd Partnership is jointly owned by his interests and Modena Investments. Modena is 50 per cent owned by the Spence family's Landmark NZ, and 50 per cent by an Italian leather company.
Greenlea managing director Tony Egan said the new joint venture would create scale and there were plans to grow the business.
Greenlea is a family-owned beef exporter employing more than 460 people in Hamilton and Morrinsville. Skins from its plants were previously processed by the Wallace operation.
Wilson Hellaby, owned by the interests of two families, employs 700 people and mainly processes meat for the domestic market. The uncured skins it previously sent to another tannery will now go to the new Waitoa operation.
Most of the hides and skins from the new business would continue to be exported, Fred Hellaby said.
Most hides from prime animals went to northern Italy for the fashion market. Other hides were bought by industrial manufacturers. China is a major buyer of New Zealand uncured hides.
The export value of New Zealand raw hides and skins and leather last year was US$179m (NZ$276m), according to the United Nations international trade database. Export returns have fallen steadily since 2011 when they were closer to US$600m (NZ$900m).
Hellaby said a tannery needed scale.
"Unless it is dealing with at least 500,000 hides (a year) it's not going to have that economy of scale. To integrate further into processing, ideally one does have a stake in a tanning business. This opportunity has added appeal because these businesses need scale and to collaborate with a company we have a lot of respect for.
Hellaby said to bring the operation up to desired standard "there is a spend in front of us".
"But that is the advantage of collaboration. We start to get committed volume which gives more investment confidence."
Previously the Waitoa operation, the central tannery base, was dependent on finding contracts, he said. Now it would have a committed supply.
Greenlea's Egan said the two processors liked the idea of a supplier-driven business model "and we like the idea that the industry is reaching a level of maturity where collaboration can be useful and valuable to everyone in the value chain".
There were not many examples of meat companies in New Zealand making a deliberate choice to work collaboratively on non-core activities, he said.
"Here we have companies of similar size and approach. Bringing them together creates scale and opportunity to try new product ranges ... this will offer opportunities for further growth and initiatives down the track."