Company says it’s looked at proposals for meat industry merger closely but talks have been inconclusive.
Silver Fern Farms says the group agitating for change at New Zealand's biggest meat processor has misled shareholders by saying its board had not investigated the potential $100 million in gains that would arise if the Dunedin-based co-op merged with its southern neighbour Alliance Group.
South Island farmers Allan Richardson and John Cochrane have succeeded in garnering more than the 5 per cent of shares needed to call a special meeting aimed at getting the board to look again at restructuring proposals put forward by Meat Industry Excellence (MIE) in March.
The resolution is: "That the Silver Fern Farms board of directors be required to provide all shareholders with a full analysis of the potential benefits and risks of Silver Fern Farms and Alliance Group merging into one co-operative entity, along with a comprehensive risk mitigation plan, verified by an independent firm."
Under the Silver Fern constitution the resolution, if passed, would not be binding on the board.
"Only if the resolution is passed at the meeting and if the board elects to act on it, would the board then undertake and provide the further analysis sought, subject to the normal bounds of commercial confidentiality," Silver Fern Farms said.
Chief executive Dean Hamilton took issue with claims from Richardson that the board had not looked into the potential gains arising from a merger, as put forward by MIE.
"We refute this statement and consider it misleading," Hamilton said.
"The company has reviewed in detail, and done so a number of times, the costs and benefits of industry consolidation, including those related to a potential merger with Alliance.
"A merger requires the willing participation of all affected parties. The company has over time had discussions with various parties concerning [a] merger which have been inconclusive." He said the board was not involved with the MIE report, but had reviewed it "and found that there was little in the way of new information not previously available to the board".
Hamilton said the company had discussed the MIE report with shareholders in many forums and looked forward to the opportunity to discuss the matter further.
A big motivation for farmers Richardson and Cochrane was concern about Silver Fern's capital base.
A merger requires the willing participation of all affected parties.
The co-op is considering raising $100 million in fresh capital but Richardson and Cochrane want the MIE ideas considered more closely before the company brings in more capital - potentially from outside the co-operative and possibly from abroad.
The farmers' moves come as the sector struggles to deal with issues of overcapacity and stock procurement, as well as lower sheepmeat prices.
Silver Fern has enlisted investment bank Goldman Sachs to advise it on possible equity-raising options as it seeks to reduce debt.
A decision on the co-op's likely course of action is expected around this month or in August.
A small group of Alliance shareholders is also in the process of raising 5 per cent shareholder support to get the Alliance board to reconsider the MIE report and report back to shareholders. The group is expected to soon reach its target.
Silver Fern has 104 million shares on issue, held mostly in Otago, Southland and Canterbury.
Silver Fern and Alliance are both co-operatives, but differ in their structure. Silver Fern is seen as a "hybrid", with 6200 ordinary shareholders and 16,000 farmer partners. Alliance, NZ's second biggest meat firm, runs along conventional co-operative lines.
