Brassed-off investor selling Affco share to fish firm

By PHILIPPA STEVENSON

Affco major shareholder Hugh Green intends to sell his $8 million stake to food company Talley's, hoping the newcomers will "straighten out" the troubled meat company.

Green told the Herald yesterday he would quit his 10 per cent Affco shareholding after five years "because our patience is running out".

Affco has not paid a dividend in four years, and in the year to September had after-tax profit of $574,000 on increased revenue of $1.2 billion.

Three other big meat companies reported record profits for the same period.

Green, represented on Affco's board by Green & McCahill director Bob Carter, said he had worked with another major shareholder, Peter Spencer, to influence Affco's direction but his company's shareholding lacked weight.

Spencer's Toocooya Nominees owns 18 per cent of Affco.

"[Spencer] and Talley's will probably be able to do it together," he said.

"We are just a minority shareholder in a big company, and we don't think we should be there."

Andrew Talley and his uncle Michael Talley seemed to be prepared to put effort into the company, and get the shareholding to back it, Green said.

Talley's has built its stake to just over 17 per cent since October, when it put more than $6 million into Affco, lifting its holding from 1 per cent to 11.3 per cent.

If shareholders at a meeting next month approve the fishing and food company's bid of about $8.7 million for Green's stake, Talley's will control 28 per cent of Affco.

Green said that should make a difference. "There's been no big shareholders there to take control, and I would think this crowd might have the answer. They've got the horsepower to do it and they seem very able people."

Andrew Talley said Affco had already made a welcome change in direction through executive chairman Sam Lewis' "back to basics" approach. Talley's supported the short-term focus on plant and management efficiency.

"We like the initiatives they are taking. We think the errors of the past, in a lot of ways, have been recognised by Affco. Where they have made mistakes they have recognised that, and we like the road they are on at the moment."

There were "definitely" more areas in which Affco could cut costs but they were for the company to reveal, he said.

Meat could potentially be a welcome addition to the Talley's food basket, which already contains seafood, vegetables and icecream.

But Talley said there were no plans to beef up the product range the Motueka-based company offered customers.

"Our interest in Affco is nothing to do with the existing customer base of Talley's or the way we operate our business at all. We look at it as a stand-alone entity and it will continue to run like that," he said.

"There are some similarities: it's export-based, a primary industry and it's adding value to products and maximising returns. We've got a lot of experience in that which we can bring to Affco but we don't see an amalgamation of customers or anything like that. Those synergies might come later down the track but not in the short term."

The meat industry's vexed procurement issue, in which the stock flow to companies is at the mercy of conditions on farms rather than led by market demand, was the main difference between it and the vertically integrated fishing industry, Talley said.

He doubted meat companies could move to farming their own stock, as in the US and Japan, because of the large volumes required to meet plant capacity. "I think they are best to specialise."

But he said that the meat industry could benefit by following the fishing industry's lead in reducing dependence on commodity products.

"We are not taking any more fish out of the water.

"We've just got to be smarter with what we do with it now in terms of adding value to it with different cuts, different products and different customers to try and get higher returns."

Green said he had no regrets about investing in the meat industry but was now right out of the sector. His farming operations would continue to supply cattle to Affco.

Once his money was out of Affco he would be in the market for new investment opportunities.

"We could probably make better use of our money handling it ourselves," said the Irish-born millionaire, a one-time roadworker whose business history, with partner Bernie McCahill, is a classic rags-to-riches story.

"We haven't done so bad so far."