Affco issue wins big support on the farm

By PHILIPPA STEVENSON

Thousands of farmer shareholders have put their hands in their pockets for meat company Affco to limit the rising influence of Talley's Fisheries.

More than 80 per cent of Affco's 6400 small shareholders took up their entitlement in a $27.1 million capital-raising rights issue which closed on Friday fully subscribed.

Talley's, and Affco's other major shareholder, Peter Spencer's Toocooya Nominees, had agreed to underwrite the 10c-a-share rights issue in a move which could have lifted their respective stakes to 35 per cent and 25 per cent.

Instead, Talley's ended up spending around $7.2 million to take its stake from 19.9 per cent to 26.3 per cent, and Toocooya paid about $5.6 million to go from 18.7 per cent to 20.8 per cent - together a still influential holding of more than 47 per cent.

Hugh Green Investments spent around $3 million to raise its stake 1 per cent to 11 per cent.

Most of the money raised, with another $8.3 million freed by the closure of Affco's American office, will go to halve the company's $50 million debt to rural lender FMG.

Chief executive Tony Egan said the other main objectives were $6 million worth of capital upgrade for the company's Moerewa, Wairoa and Manawatu plants, and to ensure all creditors were paid on time.

In 1998, FMG, formerly Farmers Mutual, came to Affco's rescue with a $65 million recapitalisation package, made up of $20 million in convertible notes, a $20 million five-year term loan, and $25 million trade finance.

Repayments have reduced the debt to $50 million.

FMG chairman Peter Jensen said the $25 million latest payment was part of the normal repayment programme.



Egan said Affco had turned term debt into equity, which would "'leave us with a stronger balance sheet".

The support of "rank and file shareholders", which meant Talley's and Toocooya were required to take up a small proportion of the underwriting agreement, was also showing up at woolshed meetings around the country.

There was a lot of endorsement for the approach the company was taking.

"They believe that we're working towards the right goals and that we've got our cost structure under control. There's a general vote of confidence from our shareholders that we're on the right track," he said.

In the second half of the year, Affco had clawed its way back from its first-half loss of $14.7 million, Egan said.

"We will still have a loss for the year, but there is a significant chunk of one-off cost associated with restructuring in our result, as well. But we have had a better second half."

The results of restructuring, including a $9 million reduction in head office costs and reducing the number of salaried staff from 650 to 250, should show in the new season, Egan said.

"We're in a much better starting position than we have [been] for many years."