SFF deal needs to clear regulating authorities

Shanghai Maling shareholders voted last Friday on the deal – to inject $261 million into the co-op, in return for a 50% share of the business

Bright Food Group, which owns 38% of Shanghai Maling, backed the deal in a letter to SFF. Last month 82% of SFF shareholders voted in favour.

Despite approval from shareholders, the two parties still need to clear regulatory hurdles; getting the green light from New Zealand and Chinese authorities is expected to take several months.

SFF expects the deal to be finalised in five-eight months.

The recent decision by the Overseas Investment Office (OIO) to reject a bid by Chinese conglomerate Shanghai Pengxin to buy the Lochinver Station is not playing on the minds of SFF and Shanghai Maling.

SFF chief executive Dean Hamilton says unlike the Lochinver bid this deal is not about buying land.

He believes Shanghai Maling's application will focus on employment and economic value to the country.

"The big thing is employment: we employ 7000 people and are a very large employer in NZ.

"This deal is for job security and confidence: as we bring more added value through our plants that will require more staff and we believe we will take on more staff.

"Secondly, the value from this deal will fall in NZ: when we increase sales of added value products that will be reflected in higher farmgate prices."

SFF board members and directors held 23 roadshow meetings; chairman Rob Hewett says for him the outcome was never in doubt.

He also notes that the deal involves more than just cash.

"We wanted to retain control of the co-op, which we got; we got the right partner who is aligned with us strategically; we also wanted non-exclusive rights to sell products around the world. We got all this."

Asked if the 17% who voted against the deal could exit the co-op, Hewett said he will wait and see.

However, Hamilton doesn't believe too many suppliers will switch to other processors.

"Some shareholders who did not back the deal are now getting behind the co-op; these suppliers want to continue to supply SFF and they believe in our strategy. At least two big shareholder suppliers said they would continue to supply, so that's good."

Overcapacity remains

SFF chairman Rob Hewett says overcapacity issues in the South Island sheepmeat sector haven't gone away with the Shanghai Maling deal.

"The issues are still there," says Hewett.

He says the $261 million cash injection by Shanghai Maling will allow it to make changes in the business and ultimately drive collaboration opportunities with other "dance partners".

"We've been open for a number of years to doing this and we continue to be open. It's logical and good business sense to collaborate where there are opportunities and to take out unnecessary costs."