KEY POINTS:
A proposed $220 million deal between two major primary industry players will shake up the struggling meat industry.
Under the proposal, rural servicing firm PGG Wrightson would buy a 50 per cent stake in meat marketing and processing co-operative Silver Fern Farms, formerly PPCS.
The two companies said
today have had signed a heads of agreement, with the deal subject to conditions including banking approvals and approval by Silver Fern rebate suppliers.
Silver Fern chairman Eoin Garden said an evaluation had identified prospective short term gains of more than $60m a year, with longer term financial benefits ranging up to $110m a year.
Under the deal Silver Fern's co-operative structure would remain, with the rights enjoyed by suppliers protected in the constitution.
Garden and Wrightson chairman Craig Norgate said the market goal would be to reposition New Zealand meat as the ethical protein source for growing international ranks of consumers demanding high quality and consistent meat products from traceable and sustainable sources.
The heart of the proposal was the formation of an integrated supply chain, the chairmen said.
"There are very clear synergies, in terms of cost and performance benefits, that both parties bring to the table.
"These translate to more money in the pockets of SFF's suppliers, and benefits to its international customers in the form of year-round supply, grower identification and product tracing, to name but a few."
Wrightson would provide access to advisory and other services inside the farm gate, and procurement for prime and store stock.
Silver Fern would provide its processing capacity, technology and expertise in logistics, marketing and branding.
Wrightson is to pay $145m on completion, and $75m plus interest by March 1, 2009.
The funds invested by Wrightson would be used to provide Silver Fern with financial flexibility to fast track the change programme already under way, invest in process improvements and position the company more attractively to progress industry consolidation, the companies said.
Information is to be made available in coming weeks, with Silver Fern shareholders meetings expected to be held in July and August ahead of a vote.
Norgate said both companies shared the view that investment in an integrated supply chain was the key to unlocking the value of high quality New Zealand meat.
"It has been a long time coming," he said.
"There is clear growth in the global protein market, so we need to build a structure to ensure that there is a stimulus to investment in the meat industry on a par at least with dairy."
Trading in Wrightson shares was halted earlier today pending the announcement.
Trading in Pyne Gould Corp, which has a 22 per cent stake in Wrightson, was also halted. The halts were lifted around 11am.
- NZPA