KEY POINTS:
Meat industry mega merger, take three.
It must be important because people keep trying to do it, but so far no one's pulled it off.
PGG Wrightson chairman Craig Norgate - one of the brains that built the booming dairy sector - is the latest to have a go.
Last year Southland-based meat processor co-operative Alliance Group turned down a offer to merge with Dunedin-based rival co-operative Silver Fern Farms (then PPCS).
Next up Alliance launched an even bigger merger deal which sank in April without agreement from Silver Fern Farms.
Last week an industry taskforce set up by Meat & Wool New Zealand to develop a strategy was shut down in the absence of consent from some parties. And yet here we go again with Silver Fern Farms agreeing to sell half of itself to listed-rural services company PGG Wrightson, with the deal seen as a platform for further rationalisation.
So will it happen? Silver Fern Farms needs 75 per cent support from its co-operative shareholders.
The other major co-operative to attempt a capital structure change recently was Fonterra, who was sent back to the drawing board by farmers.
This deal does, however, have some key differences. The most obvious is the on-going financial pressure on sheep farmers because of which they might be more prepared to take a punt.
Many sheep farmers are converting to dairying and if someone already has one eye on that prospect, or on just calling it a day, then giving a radical new scheme a go for another year of two is not such a big risk.
Meat farmers are said to be demanding a change, whereas Fonterra was trying to sell one.
Still, giving up half your co-operative is a big ask, while retaining 50.1 per cent might have smelt so much sweeter. Both parties are clear on the idea of partnership with neither to be under the control of the other.
The boldness of the plan might be its strength in a sector where no one is likely to want fiddling at the edges.
Silver Fern Farms chairman Eoin Garden says they would not have made the deal unless they were confident of the required support.
Fonterra was after outside investors, but Silver Fern Farms is getting a strategic partner whose chairman is Craig Norgate.
Norgate has a strong track record in farming having played a key role in the creation and success of Fonterra, the rationalisation of the rural services sector and lately working with the wool industry. The nature of the partnership is also different from the previous failed meat merger attempts in that it brings together two parties on either side of the farm gate to create a single supply chain linking the shopper to the farmer. Whether and how quickly the other industry players get involved is a tough call.
Norgate says it is up to them.
Meanwhile, other parties have been watching Alliance and Silver Fern Farms dance about, open to the idea of a hoki koki but unwilling to step on to the floor until the two big co-ops are holding hands.
Norgate spoke with Alliance chairman Owen Poole before the deal with Silver Fern Farms was announced. Can he be the one to spark rationalisation in the meat sector? It's hard to bet against him.
