KEY POINTS:
A fresh attempt is being made to restructure the meat industry but on a less grand scale than the mega merger proposed by Alliance Group.
It would be a staged process, with like-companies merging for commercial reasons to eventually create a large entity, rather than the Alliance concept in which it would have merged with PPCS and become the vehicle to acquire other companies to create a mega entity.
This looks like the only realistic option for industry-wide rationalisation, with little likelihood Alliance and PPCS would now merge given the tone of a recent letter to shareholders by Alliance chairman Owen Poole and indications from PPCS that it was not interested. In the letter Mr Poole said while Alliance would focus on improving returns through a new model, a merger of the two meat co-operatives would not benefit Alliance shareholders.
"Last year the board determined that a merger of the two co-operatives would not provide benefits to Alliance Group shareholders. This view remains unchanged," he said.
PPCS complained the Alliance Group's concept was too prescriptive, the timeframe too tight and other companies were not initially involved in developing the proposal.
Meat and Wool New Zealand chairman Mike Petersen said in an interview that while the Alliance concept was the ultimate goal, it could take longer to get there as companies worked through their options.
"There is a lot of ongoing discussion between the different parties trying to work out the best way to get to the end game," he said.
"It is going to be a staged approach and that is appropriate."
He believed there could be the first evidence of industry restructuring within 12 months.
All companies involved in the mega merger have indicated since talks collapsed that their focus was on their core business, but this news indicates there is plenty happening behind the scenes.
A staged restructuring would avoid the directive by Affco and Anzco that the two co-operatives sort out their differences before they would consider another industry-wide approach to restructuring.
Mr Poole said in his letter to shareholders: "We believe that the industry needs to create increased returns through a new model rather than relying on market and exchange rate cycles."
But the changes it was considering were unlikely to involve PPCS.
"During discussions, a number of other potential opportunities have been identified. While not providing the benefits anticipated by the concept, they will now be further evaluated."
- OTAGO DAILY TIMES
