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Alliance will put merger back on agenda

Alliance Group meat cooperative says its annual meeting of farmers in December will discuss efforts by Silver Fern Farms -- the former PPCS Cooperative -- to again explore the potential for a new merger of the two companies.But Alliance Group chairman Owe

NZPA
Wed, 27 Oct 2010

Alliance Group meat cooperative says its annual meeting of farmers in December will discuss efforts by Silver Fern Farms -- the former PPCS Cooperative -- to again explore the potential for a new merger of the two companies.

But Alliance Group chairman Owen Poole said today that Alliance's directors don't support the open letter published in southern newspapers at the weekend by Silver Fern Farms directors who wrote to shareholders of both firms seeking their views on a joint investigation of the benefits of the merger.

An informal "poll" of a competitor's shareholders was not an appropriate way of initiating fresh talks, said Mr Poole.

Silver Fern chairman Eoin Garden, said the advertisement and accompanying poll gave the shareholders of both companies a say and filled a leadership vacuum.

In the advertisement, Silver Fern asked shareholders if they wanted an independent facilitator appointed to chair a joint evaluation committee to create a plan for the future of meat and meat by-products with an agreed governance structure, and oversee an independent financial analysis.

The meat industry needed to consolidate and change its ownership structure if it was to improve farmer returns, and the environment was now different to 2008, when Alliance Group shareholders overwhelmingly rejected a bid by industry lobby Meat Industry Action Group (MIAG) to force a merger with Silver Fern Farms.

Some activists, such as MIAG and the Natural Products Company, said at the time that farmers could gain better prices for their livestock if one company controlled 80 percent of the red meat exports, reducing the incidence of New Zealand meat companies undercutting each other in key markets.

A few days after that rejection, Silver Fern Farms members voted to sell a 50 percent stake in their cooperative to big rural services company PGG Wrightson for $220 million, but that deal foundered on difficulties Wrightson had in delivering the promised payments during the global credit crunch.

Mr Garden said today that if there was widespread support from shareholders of both co-operatives to evaluate a merger, then it was over to their respective company boards to accept or ignore that view. Farmers had until November 8 to have their say.

Mr Poole said Alliance would write to its own shareholders ahead of the company's annual meeting, where it would gauge "more reliable" views, he said.

State-owned farmer Landcorp -- a shareholder in both meat processors -- has supported the Silver Fern Farms' attempt.

"I see no harm in taking a look at it," said Landcorp chief executive Chris Kelly. "It is absolutely worth the gamble. Sheep and beef are in dire straits in New Zealand."

According to Silver Fern, the recent southern storms may have taken a million lambs out of the market and the total decline in the past three years, amid conversions to dairying and the impact of drought, is at least 5 million.

NZPA
Wed, 27 Oct 2010
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Alliance will put merger back on agenda
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