Silver Fern owners urged to delay China vote

Silver Fern Farms Dargaville processing plant. Photo / John Stone.

Activist farmer-shareholders in Dunedin-based Silver Fern Farms have urged other farmers to hold off voting on Shanghai Maling Aquarius' offer to inject $261 million into the company until an alternative proposal had been evaluated.

South Island shareholders Allan Richardson and John Cochrane said shareholders should attend shareholder roadshows and ask questions of the board, but should not vote early on the proposal as further options were likely. Richardson declined to identify who the competing party was.

Earlier this month, South Island businessman John Rodwell said a number of agribusiness companies had clubbed together with an offer to underwrite a rights issue aimed at Silver Fern's farmer shareholders.

Richardson said that "concrete" alternatives to the Shanghai Maling offer were likely to emerge within the offer period. Farmers can vote on the offer electronically in the leadup to October 16 special meeting in Dunedin.

"All we are saying is delay your vote," said Richardson said in a statement "There is plenty of time to place your vote, but use the time available to evaluate options," he said.

Richardson said it was likely another option capable of preserving co-operative ownership and control would be forthcoming before voting closed.
The original reason for the capital raise has been promoted as the company not being a bankable proposition, Cochrane said.

"The strong operating fundamentals and significant pay down of debt over the last three years suggests that the banks reluctance to refinance is less about the banking proposition itself and more about members of the banking syndicate wanting to exit the syndicate," he said.

"Silver Fern Farms is not only bankable but provides a genuinely attractive investment proposition," Cochrane said , "why else are foreign investors seeking control?"

Richardson and Cochrane have been active in trying to get Silver Fern Farms and neighbouring Alliance Group to consider a merger rather than bring in foreign capital and dilute farmer ownership of the co-operative, which is New Zealand's biggest meat processor and second biggest primary produce exporter after Fonterra.

Silver Fern Farms is not only bankable but provides a genuinely attractive investment proposition. Why else are foreign investors seeking control?

Silver Fern shareholder John Cochrane

Richardson and Cochrane said Silver Fern Farms' year end debt of $140m represented just 20 per cent of total assets as opposed to 46 per cent two years prior, when the debt was over $300m.

"In short there is a potential upside of circa 80c/share annually sitting there ready to be gathered by farmer shareholders. "We are in danger of selling the golden goose to Shanghai Maling just before it lays its eggs," Cochrane said.

Silver Fern Farms has 16,000 sheep, cattle and deer farmer-shareholders throughout New Zealand. It owns 19 processing sites throughout New Zealand and has 7,000 staff at the pea of the season.

Shanghai Maling and Silver Fern are confident the new joint venture will the approved. The deal subject to Overseas Investment Commission and Chinese regulatory approval.