Alliance mulls merger meeting request

Alliance Group, the world's largest processor and exporter of sheepmeat, said it has written to its 5000 shareholders to update them on its thinking around industry reform before receiving a request by a group of shareholders to call a special meeting on the pros and cons of a merger with Silver Fern Farms.

Shareholders Jeff Grant and Gaye Cowie yesterday gathered the required 5% of votes needed to force the special meeting and Alliance Group chairman Murray Taggart said the company is currently reviewing the request to ensure it meets the necessary requirements before formally notifying shareholders. After that was completed, the company would work through the next steps and advise all shareholders, he said.

Although it was important for farmers to feel they can have their say, the shareholder meeting would be limited to discussing the resolution that the board provide shareholders with a full analysis of the potential benefits and risks of Alliance and Silver Fern Farms merging into one co-operative entity, along with a comprehensive risk mitigation plan verified by an independent firm, he said.

"It is not a meeting to present and vote on the results of any cost/benefit and risk analysis," Mr Taggart said. Any resolution, even if passed, is not binding on the board.

Mr Taggart said it had been a difficult year for farmers and the board was working on a strategy to build a better business and improve shareholder returns.

"We need to build a business that is capable of paying our shareholders more at the farmgate and through profit distributions and we are starting a process that will transform the business and position us to respond to any business opportunities that may arise," he said.

Mr Taggart said the board continued to look at various merger and acquisition opportunities. However, for any transaction to proceed, it needs two willing parties who are "profitable, have strong balance sheets, certainty around livestock supply, and are operating in a stable/growing business environment," he said.

"While these requirements have not been met to date, we are continuing to explore worthwhile solutions that do not require equity injections from or result in price reductions for our shareholders or expose the company and farmers to unnecessary risk."

Although mergers and acquisitions could be part of this, they weren't in themselves enough to deliver what farmers are seeking, he said.

Mr Taggart said the company had considered in detail the proposals from meat industry reform group Meat Industry Excellence (MIE), which is still pushing its plan for a new export meat cooperative that would park the debts of the two big farmer-owned cooperatives into a "bad bank." The good equity would be put into a "good bank" and the two cooperatives merged into a new company.

Mr Taggart said Alliance had met with MIE and will do so again later this month but based on current information the board's view is that the size of the merger prize identified by MIE's consultants GHD is unrealistic.

Alliance has previously said it can't see benefit in merging with the debt-laden Silver Fern Farms, which is also to hold a special meeting forced by shareholders to discuss the merger issue.

(BusinessDesk)