As farmers prepare to cast their vote on Silver Fern Farms' proposed joint venture with China's Shanghai Maling Aquarius on Friday, the prospect has helped explode the myth that co-operatives are in some way immune from attentions of outside interests.

All that is required is a simple majority of over 50 per cent of shareholders for the deal to go through, and the company's executives are confident it will.

"At the end of the day, nothing is immune from outside interests coming in," said Ian Macintosh, chief executive of Co-operative Business New Zealand (CBNZ).

"It's going to come down to the shareholders - the company's members - as to what they want."


The Silver Fern Farms board, under riding instructions from the company's long-suffering banks, fully support the proposal.

Debt has been a big issue for Silver Fern Farms over the past 10 years. It swelled to around $350 million to $400 million after the 2006 takeover of Hawkes Bay's Richmond Meats.

It then shrank back to around $115 million before ballooning out to $380 million in 2013 when the bottom fell out of the sheep meat market.

An infusion of $261 million, courtesy of Shanghai Maling, will make the company debt-free and put it in the best financial position since its inception in 1948. Silver Fern Farms is New Zealand's second biggest primary produce exporter after its biggest company and co-operative, Fonterra.

According to CBNZ - the industry association that represents most of the co-operatives - one in four New Zealanders "touch" a co-operative every day.

A United Nations survey, conducted last year, found that New Zealand had the highest number of co-operatives, per capita, in the world.

"That's because New Zealanders generally like the principles of co-operatives," Macintosh said.

"Simply put, it's a group of people getting together and getting a job done.

"It's part of New Zealand's DNA, really," he said.

"It's just that a lot of people don't realise what companies are co-operatives and what are not."

The agriculture sector has long been dominated by co-ops, from Fonterra to fertiliser businesses Ballance Agri-Nutrients and Ravensdown, farm supplies firm Farmlands and genetics specialist Livestock Improvement Corp - all of them substantial companies.

Outside the primary sector there are several large co-operatives.

CBNZ counts Foodstuffs - the co-op behind the FourSquare, New World and Pak 'n Save supermarket brands - as a member.

Building supplies firm Mitre10 and healthcare provider Southern Cross are also co-ops.

The combined turnover of CBNZ's top 40 members came to $40 billion last year.

The common problem faced by co-operatives was capitalisation, Macintosh said.

"That's not just a New Zealand thing; it is a global phenomenon," he said. "All co-operatives around the world have potential issues around capitalisation."

Rural lending specialist Rabobank, in a recent analysis of co-operatives, said the traditional source of investment capital - the member base and modest debt facilities - may no longer be enough to allow co-ops to fully participate in an increasingly dynamic global food market.

"For agricultural co-operatives seeking to capture value from the favourable global market environment, maintaining the status quo is not a strategy," said Rabobank's Hayley Moynihan.

"Confronting the issue of sourcing capital will be required, alongside tackling increased market complexity," she said.

The co-operatives' operating environment was also becoming more complex.

Strategic and financial investors typically want the capability to influence and control strategy and enjoy the benefits of ownership, Moynihan said.

"For co-operatives, though, retention of ownership and control strikes at the very core of co-operative enterprises and is usually non-negotiable."

While he was not close to the Silver Fern deal, Macintosh said it was likely to change the perception of the co-operative's producers if it went through.

"I think what people have to be aware of is that once you lose something, you very rarely get it back," he said.

"So you have to be very careful about what you are losing."