Farms' China deal 'win-win' situation

Rob Hewett

Hawke's Bay meat will be in more Chinese supermarkets thanks to farmer-controlled Silver Fern Farms' planned 50/50 partnership with listed Chinese meat processor Shanghai Maling, which controls 800 supermarket and retail stores.

Waipukurau beef farmer and Silver Fern director Angus Mabin said the deal was a win-win. "I think it is very, very good for the Hawke's Bay economy, the security of the existing plant, the value-added programmes we have at the plants and suppliers," he said.

Silver Fern has 17 processing plants nationally, three in Hawke's Bay at Takapau, Hastings and Frasertown.

Silver Fern chairman of farms Rob Hewett said the board unanimously recommended the deal to its co-operative shareholders. "Under the proposed deal Shanghai Maling will invest $261 million in cash for half of Silver Fern Farms' business," he said. "The investment will be into a company, to be named Silver Fern Farms, which will own all of the assets of the business, and be owned 50 per cent by the existing Silver Fern Farms Co-operative and 50 per cent by Shanghai Maling."

The transaction valued Silver Fern ordinary shares at $2.84, compared with the last traded price of 35 cents.

Mr Hewitt said when Silver Fern went looking for an equity partner, to realise ambitions and retire debt, Shanghai Maling "stood out".

It leaves Silver Fern debt-free "with money in the bank", bringing opportunities around collaboration and rationalisation.

The partnership would "turbo-charge" its Pasture to Plate marketing strategy, enabling the targeting of countries such as Germany and the United States.

Mr Hewitt said for day-to-day operations "nothing changes".

"We will still be processing beef, sheep and venison. From the farmers' point of view it will be the same livestock rep coming up the driveway, buying the same stock and having the same sort of discussions they have today ..."

The deal is subject to regulatory and farmer shareholder approval, with a roadshow for farmers planned.

Napier Labour MP Stuart Nash said if the deal resulted in more jobs in New Zealand "then that is fantastic" but, with 10 per cent of New Zealand productive land already in foreign hands, it was a concern the value-added capability was also being sold and fewer profits remaining in New Zealand.

He said the industry was ripe for consolidation and in 10 years' time Silver Fern might control the majority of the industry, with the possibly of Shanghai Maling a majority owner.

"New Zealand has to think hard if that is the road it wishes to go down."