KEY POINTS:
Farmers could see benefits by Christmas from selling half of meat processor co-operative Silver Fern Farms, says PGG Wrightson chairman Craig Norgate.
Silver Fern farmers yesterday approved the $220 million sale to listed rural services business PGG Wrightson by a slim margin - 75 per cent was needed and 75.6 per cent support was received.
Independent adviser Grant Samuel said the offer was within a valuation range of $205 million to $225 million.
Going into yesterday's vote, Norgate was not confident.
"I was bloody nervous," he said. "Now the work starts I guess."
The deal was promoted as creating a plate-to-pasture supply chain and a platform for sector rationalisation, and Norgate was keen for farmers to see meaningful change before Christmas.
"I think it'll be in the form of the sort of contracts that we can offer to give them some certainty around livestock prices," he said.
"The jury won't come in for 12 or 18 months but we'll be getting started straight away."
The deal was expected to generate annual short- and long-term benefits of more than $60 million and up to $110 million respectively.
Sheep farmers have had three years of low returns, with many switching to the dairy sector.
Meat & Wool New Zealand said more than 300 new dairy farms started this season and sheep numbers were down 11 per cent in the year ended June 30 at 34.2 million.
The export slaughter for the season starting on October 1 was expected to be down 9.3 million animals.
Sheep and beef farm profitability was expected to improve from an average of $19,400 to $53,000 in the coming season with better market prices because of tightening supply and depreciation in the exchange rate.
Silver Fern Farms chairman Eoin Garden said it was a great day for the red meat industry, with an unprecedented injection of new capital.
"Our relationship is based on a shared vision for the industry and an alignment of commercial drivers," Garden said.
"That vision also extends to a committed drive for further industry consolidation, and this vote in favour of the partnership is a clear mandate from our shareholders to pursue this direction."
Meat & Wool New Zealand chairman Mike Petersen did not see the deal as the start of a domino effect in the industry.
"You'll see a real procurement battle at farm gate but there may not be too much in the way of other companies restructuring or taking on debt to do so," Petersen said.
"The need for it [rationalisation] is absolutely still there."
The PGG Wrightson deal was the latest in a number of attempts at industry reform.
On Friday, Alliance Group farmers voted against resolutions to support the creation a single co-operative, a Meat & Wool New Zealand taskforce was shut down in June lacking consent, an Alliance proposed mega-merger collapsed in April and last year Alliance turned down an offer to merge with Silver Fern Farms.
Alliance said recently the opportunity for a wider industry mega-merger had gone, although chairman Owen Poole said last week that there was now an opportunity in the industry for constructive dialogue towards a common view.
It's a deal:
Farmers have agreed to sell half of meat processor co-operative Silver Fern Farms to PGG Wrightson for $220 million.
The deal is promoted as creating a plate-to-pasture supply chain and a platform for industry rationalisation.
Long-term financial benefits of up $110 million a year are expected from the deal.
