Odds against locals' tardy bid to control Richmond

By TONY LEGGETT

Hawkes Bay farmers have already missed their best chance to wrestle control of their prized meat company Richmond from southern rival the Primary Producers Cooperative Society (PPCS).

The belated efforts of a motivated few farmers to consolidate the hundreds of smaller shareholders into holding company Richhold are more than two years too late. The serious money is on the southerners winning the battle for control.

So is history. Remember Fortex's state-of-the-art Silverstream plant? PPCS picked it up for a song shortly after the Skeggs Group acquired it from the Fortex receivers in late 1995.

There are numerous other examples of PPCS' knack for picking up meat industry assets, often at bargain prices.

Richhold's plans for gathering a majority share in Richmond suffered a body-blow last week when the Richmond board issued a statement to shareholders outlining the pros and more burdensome cons of the Richhold offer.

The idea of swapping one share in Richmond for one in Richhold may still appeal to some farmer shareholders keen to pursue the fight. But the potential loss of equity and questions over access to dividends, plus the shareholder restrictions on voting rights and takeover provisions, are too large to ignore, in the board's view.

Some Hawkes Bay farmers have already demonstrated how far they are prepared to go to retain control of Richmond.

One is still fighting a defamation action brought by PPCS after linking the company's activities in the US lamb market with the Class 201 action that led to heavy duties on imported New Zealand and Australian lamb. And PPCS chief executive Stewart Barnett and chairman Jim Pringle will long remember the roasting they received at Richmond's special meeting last September.

However, the best chance for farmers to lock in control of Richmond was in late 1997, when the Meat Board revealed plans to sell its 33.4 per cent shareholding in the company.

PPCS and Affco both signalled an interest in the shares but the southern cooperative quickly emerged as the likely buyer, motivated by thoughts of Richmond's chilled lamb supplier base.

In hindsight, Richmond's then board had PPCS on the ropes when it was awarded a High Court injunction effectively preventing the southern firm from buying the Meat Board stake.

That was the time to go to farmers with a plan to buy the board's 13 million shares. Instead, Richmond went with HKM Nominees No 1, a company formed by Maori businessmen Alan Haronga, Arama Kukutai and Paul Morgan, which later sold to PPCS.

Over the past two years, Richmond has recorded meteoric growth in turnover to just under $900 million, mostly through acquisition. However, it has come at the cost of bottom-line performance and undermined the unity of the board.

The company is reportedly trading profitably this financial year, but the growing pains of the past two years are still evident. Richmond's bankers recently extended the company's working capital resources and the board is considering proposals to permanently increase the funding base.

Richmond's new chairman, Bob Croker, will be mindful that the company's profitability relies heavily on the support of its farmer suppliers.

Richmond may be a North Island meat company, but the heart of its supplier base is smack in the centre of Hawkes Bay.

The role new cornerstone investor Peter Spencer will play is also unclear.

Spencer's company, Toocooya Nominees, owns 10 per cent of Richmond and 20 per cent of listed meat company Affco, fuelling speculation that the meat industry could be headed for more restructuring.

The odds are against Richhold succeeding, not because the farmers behind it lack commitment or integrity, but because they are simply too late.

* Tony Leggett is editor of Country-Wide, a monthly rural newspaper circulating in the lower North Island.