Silver Fern Farms has sold its Napier rendering plant to Lowe Corp for an undisclosed sum in a deal which will see New Zealand's biggest meat processor and marketer outsource all of its North Island hide and pelt production this year.
Leathers will be acquired by Lowe at the end of this month as part of a toll processing arrangement where the company will process and market all of Silver Fern's hides, pelts and wools, in a move flagged last November that is set to "dramatically change" the sector.
Closely held Lowe is the country's biggest processor and exporter of hides, skins and rendering materials, with eight plants throughout the country. The entire meat industry is grappling with over-capacity and companies are likely to close more meat processing plants in coming years, analysts say.
"It's a smart strategic partnership where we are collaborating to avoid duplication and to create additional value for our farmers and shareholders in the sector," Keith Cooper, Silver Fern chief executive, said in a statement.
"At an industry level we have said the industry needs to work together to ensure it is sustainable and this partnership shows we are committed to following through with our intentions," he said.
The farmer-led Meat Industry Excellence group has this year been pushing for closer integration of meat companies in an attempt to improve efficiency and boost profits. The group has gained representation on the boards of Silver Fern and Alliance Group, the second largest meat cooperative by sales.
Silver Fern will cease rendering on all North Island plants by Sept. 30, outsourcing to Lowe and Wallace Corp.
The company declined to say how much Lowe Corp paid for the plant. Raw hides, skins and leather are New Zealand's 19th largest export, with $601 million of product sent overseas in the 12 months ended Jan. 31.