China head start for SFF

Silver Fern Farms operates 21 processing sites nationally, including this meat works at Dargaville. Photo / John Stone

Silver Fern Farms (SFF) - which operates the meat works at Dargaville - could soon be in a 50-50 partnership with leading Chinese meat processor Shanghai Maling Aquarius Group.

SFF directors have unanimously recommended accepting a Shanghai Maling offer to pay $261 million for a half share of the New Zealand business.

SFF is a co-operative representing more than 16,000 sheep, cattle and deer farmer-shareholders throughout New Zealand. The transaction with Shanghai Maling values SFF equity at $31 million or $2.84 per ordinary share, which compares to the 35c share price before their suspension in July.

The $261 million Chinese cash injection would clear SFF debts and put the co-op in a positive cash position by the end of the year. At the time of the transaction, the SFF board plans to pay a $35 million (30c a share) special dividend to ordinary and rebate shareholders.

Completion of the 50-50 deal would create New Zealand's financially strongest red meat processing company, provide SFF with financial capability to accelerate its global "Plate to Pasture" strategy, and position it with a competitive advantage in China, the world's fastest growing red meat market.

SFF operates 21 processing sites throughout New Zealand and eight sales and marketing offices around the world. It is also one of New Zealand's largest employers, with more than 7000 staff at peak season.

Shanghai Maling, a listed company based in Shanghai, is 38 per cent owned by the Bright Food Group.

SFF chairman Rob Hewett said that by Shanghai Maling investing $261 million of cash into the business in return for 50 per cent, the co-operative would own 50 per cent of a business whose equity value had effectively doubled in size.

The intention, subject to board approval at the time, was for SFF to return 50 per cent of profits every year to its two shareholder groups.

Mr Hewett said shareholders and suppliers would hear more about the partnership over coming weeks.

"We expect to send shareholder materials out ahead of a shareholder meeting planned for October 16," he said.

"The investment is subject to shareholder approval by both parties and regulatory approvals in New Zealand and China.

"We expect the transaction to be completed in the first half of next year."

Meanwhile, shortly before the announcement on Tuesday of SFF board support for the Chinese partnership, the immediate past chairman of the Meat Industry Excellence group, John McCarthy, issued a media release asking: "Will our killing sheets be in Mandarin?"

Claiming farmers were increasingly dismayed the National Party had seemingly abandoned them, he said the Government was turning its back on rural communities in favour of foreign control.

"This Government is all about snuggling up to the Chinese opportunity and it appears they are prepared to do so at any cost, including, in this instance, a passive sanctioning of increasing sales of NZ family silver," Mr McCarthy said.

"To question the logic around this is not xenophobia.

"To the contrary, it is a recognition and a tribute to the trading prowess of the Chinese and an understanding of the patterns and potential pitfalls that are the flip side of that huge opportunity."