Chairman Hewett said the Chinese investment was a "watershed" moment for the company and for the New Zealand meat industry, which has for years struggled with issues of overcapacity, under-investment, intense competition for stock and low returns.
Silver Fern has been seeking a $100 million capital injection to strengthen its balance sheet before bank debt falls due next month. Silver Fern hired Goldman Sachs to look at its capital structure late last year.
Pressure groups in Silver Fern Farms and its neighbouring Alliance Group have called for both companies to consider merging in favour of taking in foreign investment.
Wanaka-based businessman John Rodwell confirmed to the Herald last night that local agribusiness companies had clubbed together with an offer to underwrite a rights issue but Hewett said the sum involved not enough to eclipse the China deal and to satisfy its bankers.
Silver Fern has said that it was on track for 2015 full-year earnings before interest, tax, depreciation and amortisation in the range of $75 million to $85 million.
Bright Foods has a 51 percent stake in South Island milk processor Synlait through its unit, Bright Dairy & Food.
Problems in the industry have been made worse by a dwindling sheep population which has gone from a peak of 70.3 million in 1982 to 28.6 million today.
"A lot of money needs to be spent on Silver Fern Farms to make it efficient again," said one analyst. "Many of the Silver Fern plants are at the high end in terms of operating costs."
The industry suffers from overcapacity, much of it with Silver Fern Farms.
ANZ rural economist Con Williams said profitability in the sector had been poor for an extended period, which had hampered reinvestment, weakening profits and balance sheets.
Pressure groups within Silver Fern and neighbouring Alliance Group have called for both companies to seriously consider merging before taking in foreign investment.
Finance Minister Bill English said last week that ownership of Silver Fern was a matter for its farmer shareholders to determine.
"The New Zealand farmers who are shareholders have total control over that business now, and it is in their power to keep control over it, so we can't really force them to own a business if they don't want to own it," he said.
Alliance put in a bid - but can't say more
Alliance Group chair Murray Taggart said the co-operative was unable to comment on whether Alliance Group had been involved in SFF's capital raising programme for legal reasons.
"Alliance Group's board and senior management have worked hard to engage with SFF and discuss opportunities for industry consolidation with them," he said in a statement "We have evaluated the potential for a merger with, or the acquisition of all or part of, SFF on many occasions over the last 10 years.
"Our view has always been consistent. The business case for any merger or acquisition needs to stack up, the benefits must be accurate and the risks clear," he said in a statement.
"We've let our shareholders know that we've been examining opportunities for industry consolidation that have merit, but we've been limited in what we have been able to say," he said.
Alliance Group's focus had been to ensure that any transaction made commercial sense for our shareholders.
Taggart said Alliance Group would continue to examine and pursue any worthwhile proposals or opportunities for industry consolidation that are in the best interests of its shareholders.
Taggart said that SFF's decision to sell half of its business to Chinese investors meant that Alliance Group is now the only wholly farmer owned red meat major processor.
"We believe it is important for NZ farmers to retain ownership of their industry and the best way to achieve this would be to supply Alliance Group as the only remaining major co-op," he said.
READ MORE:
• More than China option in Silver Fern play
• Chinese buyers want 50 per cent of Silver Fern Farms
John McCarthy, a former chairman of Meat Industry Excellence, a group set up to promote change in the industry, said: "This is a watershed for New Zealand, it is a crossroads for NZ inc and has the potential to change the face of our rural communities and to blur that unique point of difference and global opportunity."
McCarthy said English's comments around the Silver Fern Farm's "debacle" were disturbing.
"His comments are a cop out and are indicative of the Government turning its back on rural communities and New Zealand in favour of foreign control," McCarthy said.
"With the pragmatic cynicism that is the hallmark of this administration they have paid lip service to the concerns that have been mounting over the past years as farmers become increasingly worried as to the future viability of their farms and their inter-generational opportunities."
McCarthy said Primary Industries Minister Nathan Guy had been "missing in action" in the red meat sector.
"This Government is all about snuggling up to the Chinese opportunity and it appears they are prepared to do so at any cost, including, in this instance, a passive sanctioning of increasing sales of New Zealand family silver."
Silver Fern has already made inroads into its debt, having repaid about $100 million in the year to last September.
The company's debt problems arose in the 2011/12 and 2012/13 years when it chalked up big losses. It turned in a small profit of $500,000 in the year to September 2014.
Silver Fern rebranded in 2008 and went down the value-added route, supplying Silver Fern-branded venison, beef and lamb. China is its biggest customer.
See the full Silver Fern announcement here:
