“Importantly, the plan makes use of the ability to offset $191m of tax losses against future profits, an opportunity which would be given away in a majority sale,” the group said in a statement.
Southland farmer Jeff Grant, who has a 30-year track record in corporate governance in and outside the agri sector, said Alliance had worked through significant restructuring over the past 18 months.
“On the back of this, we have achieved a massive turnaround and return to profitability.
“In this ‘non-peak’ year, Alliance Group generated a profit of circa $20m, a $90m turnaround versus last year, and profit is projected at $75m next year.
“The question farmers need to ask themselves before they vote is, why would we sell this critical asset at a time when red meat prices have never been better and global demand for our world-class protein is exploding?”
Former Beef + Lamb New Zealand chairman and Alliance Group shareholder Andrew Morrison said the group had gone above and beyond to secure credible options.
“There are critical benefits to our processing infrastructure staying NZ-owned,” he said.
He said shareholders have repeatedly expressed concern to the Alliance board that they had not been given the same opportunities, or access to the same information as Dawn Meats, to explore alternatives that could retain full local ownership.
The competing bid emerged as Ireland-based Dawn Meats said it would increase its proposed investment in Alliance Group by an additional $20m-$25m after stronger than forecast year-end results from the co-op.
Alliance chairman Mark Wynne said the additional investment had been triggered by an agreed adjustment mechanism between Dawn and Alliance, which rewards stronger-than-forecast year-end performance.
“Alliance’s unaudited year-end profit projection of between $18m and $24m is above the agreed profit target, and the company’s net debt position is lower than forecast.
“Under this adjustment mechanism, this means an additional $20m-$25m investment from Dawn,” he said.
The additional payment would be distributed as a dividend from the joint venture to the proposed Alliance Investment Co-operative.
This is in addition to the $40m in loyalty payments already planned, bringing the total dividend distribution to about $60m.
Grant told the Herald the debt-laden co-op had turned around and there had been a huge lift in market prices.
He said the prices he was receiving now for beef, venison and lamb were the highest seen in his 43 years of farming.
“If you asked me the same question 12 months ago, I would have said that it was at break-even point in terms of running a sheep and beef farm.
“It has dramatically turned around,” Grant said.
“What we’ve been saying all along is that we think the company was put up for sale at the lowest point in 74 years driven by the pressure of its longer-term and mid-term debt, created through the actions of the board.”
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
