Alliance plans to offload 65% of shares for $250m
Alliance Group has announced plans to sell a 65% stake in the farmer-owned co-operative to Irish meat processor Dawn Meats Group for $250 million.
Williams told Rural News that it was a big decision for the shareholders, but the proposal still left structural problems for the industry.
"I struggle to see how Dawn Meats investing in Alliance changes the current structural issues we have with sheep producing in New Zealand.
"While it will solve one of the short-term problems in terms of the capital of Alliance, it doesn't solve problems of falling numbers of sheep being processed."
Although not an Alliance shareholder himself, Williams says shareholders should expect the upcoming series of roadshow meetings to shed more light on the future structure of the company.
"If I was Dawn Meats investing in Alliance, part of that would be closing down some form of plant before they took over.
"Because there needs to be capacity changes, doesn't there? Otherwise, they're in exactly the same place that Alliance currently are, fighting over an ever-shrinking pile."
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Federated Farmers South Canterbury president Greg Anderson agreed the industry had to get its processing capacity to the right size for the amount of stock they can procure.
Alliance had made a move with the closure of its Smithfield plant at Timaru but some of the other companies would have to look at their capacities as well, he said.
A longstanding Alliance shareholder, Anderson said the Dawn Meats proposal was "probably the logical choice".
"It'll be disappointing because we're going to lose control of the company, but I don't think there's much they can do about the position they've gotten into."
He said Dawn Meats looks to be a very good partner.
"Looks like they're going to tick all the boxes. But they're not going into it for nothing. They're doing it because they can see a dollar in it."
Anderson noted the irony that, with improving prices and farm confidence, shareholders are probably in a better position now to come up with the cash than they were when the board first revealed the need to address the debt. However, he did not expect them to reject the Dawn deal.
Federated Farmers national meat and wool chair, Richard Dawkins, said it was not for the Feds to influence Alliance's decision.
But he encouraged farmers to "attend the roadshow events, understand the issues and understand the proposal".
"Apathy is not a solution."
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Federated Farmers national meat and wool spokesperson, Richard Dawkins. |
Alliance plans to detail the proposals to shareholders in a booklet on Sept 15 then a series of farmer roadshows from Sept 29.
Acceptance would require a yes vote from at least 50% of all shareholdings and at least 75% of those who vote. The vote, including proxies, will be taken at a Special General Meeting in Invercargill in mid-October.
The board warned that rejection would force it into "a process led by its banking syndicate, which may involve possible asset sales, site closures and further cost-reduction initiatives".
Deal or No Deal?
The Alliance Group's farmer shareholders are being urged to accept a restructuring proposal that would see the processor lose its proud status as a fully farmer-owned co-operative.
It is an outcome the Alliance board was keen to avoid when it first revealed nearly two years ago the need for a cash injection to meet a mounting capital crisis.
But it now says there is no realistic alternative to accepting a part-sale to Ireland's Dawn Meats.
Under the proposal - subject to shareholder acceptances, High Court and regulatory approvals - Dawn would pay $250 million for 65% of the Alliance Group.
The Alliance board says the proceeds would be used to reduce Alliance's short-term working capital facility by about NZ$200 million, accelerate the board's strategic capital expenditure programme, and enable the distribution of up to $40 million to the co-operative, subject to shareholder livestock supply.
Alliance Group chair Mark Wynne said the announcement comes after a two-year process to reset and recapitalise the business.
"The process we have undertaken on behalf of our farmer-shareholders to meet our banks' requirements means we are now a much fitter and stronger business. However, we need this investment to provide certainty and confidence and ultimately unlock more value for our farmers."
