KEY POINTS:
Resolutions to start two of New Zealand's biggest meat processors on the path to a merger face an uphill battle, says the Meat Industry Action Group.
Southland-based Alliance Group is holding a meeting today to hear the action group's resolutions. Dunedin-based rival co-operative Silver Fern Farms will have
a similar meeting on October 7.
Action group chairman John Gregan said the organisation was hoping for the best but would not be surprised if it failed to get the required more than 50 per cent approval.
"We're doing what we can but we're just a group of disaffected farmers, I guess, who are trying to change things for the better," Gregan said.
Sheep farmers have faced three years of low returns, while sheep numbers dropped 11 per cent in the year ended June 30 to 34.2 million after the impact of drought and the expansion of dairying.
The action group's resolutions are seeking support for a single farmer-owned co-operative, the boards to work together to create a national champion, a constitutional committee with an action group-appointed chairman and more meetings in March to remove and re-elect all directors.
The board of Alliance is recommending farmers reject resolutions it said gave unacceptable power to the action group-appointed chairman and undermined board responsibility, while the case for a merger with Silver Fern Farms was poor with unacceptable risks.
Alliance last year turned down an opportunity to merge with Silver Fern Farms and then in February proposed a bigger industry mega-merger which collapsed in April, lacking agreement with Silver Fern.
The situation in the industry had to be addressed one way or another, Gregan said. "If we address it with the present last-man-standing-type mentality then there's going to be a lot of blood on the floor," he said.
"We'll see fewer players in the industry but it won't be through consolidation it'll probably be through failure."
The action group's objective is the creation of a farmer-controlled, market-led company that accounts for 80 per cent of red meat procurement, processing and marketing.
Silver Fern accounted for about 33 per cent of sheep meat exports and 35 per cent of beef, while Alliance accounted for 27 per cent of national sheep meat production. However, Alliance said the opportunity for a wider industry mega-merger had gone.
Chairman Owen Poole said: "You never say never in this business and things are changing, livestock numbers and the like. But for now anyway it's gone."
The Silver Fern Farms meeting on October 7 would be pointless if Alliance shareholders rejected the resolutions.
Meanwhile, Silver Fern Farms will hold another shareholder meeting on Monday to vote on plans to sell half the company to listed rural services business PGG Wrightson for $220 million.
Meat & Wool New Zealand chairman Mike Petersen said Alliance shareholders wanted to see change and consolidation in the industry but would probably reject the resolutions.
"I just don't think that they're convinced that this is the right change."
The most defining event of the year would be having nine million fewer sheep to kill, he said. "I think we're in for a real procurement war this year as processors battle to keep their share of livestock."
THE MERGER
* Farmers are voting on Meat Industry Action Group resolutions.
* The resolutions seek support for the creation of a single farmer-owned co-operative processor and for the boards of Alliance Group and Silver Fern Farms to work together.
* The group's wider objective is to create a company that accounts for 80 per cent of red meat procurement, processing and marketing.
