The Financial Markets Authority says it doesn't believe an information pack for Silver Fern Farm shareholders on the merits of a takeover by Shanghai Maling Aquarius was misleading, even though debt turned out to be lower than projected while profit and revenue were higher.

The regulator was responding to complaints from the New Zealand First Party that Silver Fern had misled its shareholders by portraying the meat processor as being in a more parlous state than was the case in order to win support for Shanghai Maling's offer to acquire a controlling 50 percent stake in return for $261 million of cash, a special dividend, and funds to bankroll the cooperative for seven years. After the deal was announced last year, Silver Fern warned it was at the mercy of its bankers and risked receivership if the Chinese offer was rejected.

The FMA said it investigated the complaints and "engaged with directors and senior managers at Silver Fern" to verify the information in the pack supplied to shareholders, which had been finalised on Sept. 23, just seven days before the financial year-end. The pack had included forecast debt of between $140 million and $160 million while the year-end results released on Nov. 9 showed actual debt was $121 million. The actual profit and revenue figures were also better than in the information pack.

The regulator concluded that Silver Fern's debt was "highly variable and can change significantly from day to day" and also fluctuated considerably through the year because of the seasonal nature of the business. It accepted the board's view that the difference between the forecasts and the actual results "were not material to the shareholders' resolution on the transaction".


But the FMA also encouraged companies with high seasonal debt to consider how to provide useful and meaningful information in their annual reports to improve the transparency and consistency of their disclosures.

"This may improve investor understanding of the company and allow investors to better assess proposals such as the transaction," the FMA said. It noted that Silver Fern disclosed its peak seasonal debt in its 2013 annual report but not in 2014 or 2015 and suggested a measure of average annual debt would be helpful.

"If this information had been provided to SFF's shareholders it would have provided investors with a more transparent picture of SFF's debt situation that we understand would have been consistent with the descriptions in the information pack," it said.

The FMA said a second complaint, that the transaction should have been voted on as a special resolution rather than an ordinary one, wasn't something it needed to follow up on.

The Overseas Investment Office is assessing the application from Shanghai Maling, a unit of China's state-owned Bright Food Group, which it received in October, and expects to make a decision ahead of Shanghai Maling's June 30 deadline.