Farmers unhappy with Silver Fern Farms

Silver Fern Farms Dargaville processing plant. Photo: John Stone.

Frustrated Silver Fern Farms shareholders are seeking support to force a special meeting in a bid to obtain full analysis of the potential benefits and risks of a merger with Alliance Group.

West Otago farmer Allan Richardson, who has been working with a group of fellow farmer shareholders, said there was limited time to act.

Silver Fern Farms was looking for $100 million in outside capital which would ''most probably'' be foreign capital, yet there was a very good option that had been ''virtually dismissed''.

While the group was not against foreign investment, it was against foreign control.

Co-operative status needed to be protected ''or we may end up with a majority, foreign-owned red meat industry'', Mr Richardson said yesterday.

When approached for comment, Silver Fern Farms chairman Rob Hewett said the company had previous discussions with Alliance Group which were ''inconclusive''.

''Consequently, we believe it is in the company's best interests to continue with the current process of investigating sources of new capital for the co-operative which we announced last year,'' Mr Hewett said in a statement.

Goldman Sachs was appointed by the board to identify potential capital transactions to accelerate debt reduction and invest in value-added and plant improvement.

Concerns over the raising of capital were aired by shareholders at the company's annual meeting in February.

At that time, Mr Hewett said the process had just started and it would take until the end of May or early June for the board to have a better view and be able to answer questions.

The company's constitution stated a special meeting could be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.

Mr Richardson said the group was seeking that support nationally and key shareholders had been identified.

He was ''very confident'' of reaching that 5% threshold quickly.

The non-binding resolution, which the group wanted considered at the meeting, was that the board be required to provide all shareholders with a full analysis of the potential benefits and risks of a merger, along with a comprehensive risk mitigation plan, verified by an independent firm.

Shareholders needed that analysis before the board considered bringing in foreign capital to improve its balance sheet.

That should be ''the last option, not the first'', he said.

While Mr Richardson had previously been involved in industry reform, he had stepped back over the last few months.

But frustration over a lack of action over a Meat Industry Excellence-commissioned report, released in March, spurred him to act.

The report highlighted savings of $100 million per year, if Silver Fern Farms and Alliance Group worked together, rather than competed against each other, he said.

He believed it was a ''very good report'', which clearly stated where savings could be made and pathways to the future.

''I really think it deserved a better response from the boards [of Alliance Group and Silver Fern Farms].

''Both boards really just dismissed it and kicked it to touch and carried on with their business,'' he said.

Sheep numbers were falling rapidly and were now at their lowest level since 1943, while farmer morale was also low.

Farmers, who were in survival mode, needed to realise it might be the last chance to retain control of their co-operative.

''If we lose control of our co-operatives, we lose control of our say.''

While the companies could not be forced to merge, they needed to ask hard questions, be open with shareholders and fully communicate with them.

''There's been no industry vision, nothing to keep farmers in this industry. It's almost a battle of last man standing between the companies. The only thing we can do is through the co-ops we own,'' Mr Richardson said.

''We want them to do these reports and report back to farmers so farmers get the facts in front of them while we are still a co-op. We don't know where this will end up,'' he said.

He stressed it was a farmer-led ''grassroots'' approach to Silver Fern Farms, not from Meat Industry Excellence which has been seeking industry reform.

He hoped something might also happen at Alliance Group.

Meat Industry Excellence chairman John McCarthy said he was pleased shareholders were starting to get involved and he wished the group well.