KEY POINTS:
A merger with Dunedin-based meat processor PPCS is not commercially sound, says Alliance Group chairman John Turner.
The prospects of a merger between the two farmer co-operatives came to nothing this week after PPCS said it wanted to merge but Southland-based Alliance declined the offer.
The two companies engaged PricewaterhouseCoopers in June to appraise operations and evaluate options to improve livestock returns to farmers.
The benefits of a merger had not been as significant as anticipated, Turner said.
"A merger has not progressed because we are of the firm view that it is not in the interests of Alliance Group's supplier-shareholders at this time," he said.
"Alliance Group directors will not recommend a proposal to shareholders that is not commercially sound."
PPCS said earlier this week it thought the case for a merger was compelling and in the interests of the long-term sustainability of the sheep meat industry.
Alliance chief executive Grant Cuff said that in an environment including many meat processors and exporters, the normal commercial approach was for ongoing consolidation.
"We do think a single large co-operative would be preferable but it is a decision for the future," Cuff said.
PPCS took over Hawkes Bay-based Richmond in 2004 for $140 million after a long-running and hostile takeover battle.
"It's public knowledge that PPCS' balance sheet is not as strong as Alliance Group's and part of that reasoning has been their expansion over the last few years," Cuff said.
Alliance Group employed more than 5000 people at the peak of the season with an annual turnover of $1.1 billion, compared with about 9000 staff and $2 billion at PPCS.
"You've got to remember that PPCS are twice our size so the weighting of any financial issues is towards the PPCS balance sheet," Cuff said.
National exports by PPCS and Alliance accounted for 32 per cent and 27 per cent of sheep meat, 31 per cent and 6 per cent for beef, and 58 per cent and 20 per cent of venison, respectively.
Alliance said it still wanted to pursue other initiatives with PPCS, resulting from discussions related to the PricewaterhouseCoopers report.
PPCS chief executive Keith Cooper said there were no other formal proposals between the two companies.
"Through industry bodies we're working with them on various things from time to time," Cooper said.
