Dawn Meats may buy 65% of Alliance Group for $250 million
Chairman Mark Wynne said Alliance was built by farmers for farmers and had a proud co-operative legacy.
'The process we have undertaken on behalf of our farmer-shareholders to meet our banks' requirements means we are now a much fitter and stronger business.
'However, we need this investment to provide certainty and confidence and ultimately unlock more value for our farmers.'
Wynne said the Dawn Meats proposal would secure and strengthen Alliance's future.
'With Dawn Meats' balance sheet power, strength in beef and market access across the United Kingdom and Europe, and Alliance's strength in lamb and market access across China, wider Asia and North America, there are significant commercial and operational synergies at stake – with potential for our shareholders to see the value of their residual 35% stake grow over the long term,' he said.
The recapitalisation process explored several options and generated a compelling offer, which the board has unanimously endorsed.
The transaction is to be implemented via a scheme of arrangement and will require a minimum of 75% shareholder acceptance of those who vote, and greater than 50% of all shareholders voting 'yes' at a special general meeting in Invercargill in mid-October.
If shareholders do not support the proposed investment, the Alliance board would be obligated to enter into a process led by its banking syndicate, which may involve possible asset sales, site closures and further cost-reduction initiatives, the board said.
Dawn Meats has a successful operating and investment track record in Ireland, the UK and the European Union, Dawn Meats CEO Niall Browne said.
'Having the ability to grow in partnership with some of New Zealand's leading farmers and create year-round supply for our customers between the Northern and Southern Hemispheres is an opportunity we are deeply committed to and take very seriously,' he said.
Dawn Meats is a family-owned business established by three farming families in Waterford, Ireland, in 1980.
It has 24 facilities and more than 8000 employees in 10 countries, processing more than 3.5 million sheep and 1 million cattle per annum, with a core annual turnover of more than $5.8 billion.
Dawn Meats has a stable of strong and well-recognised brands, including operating the Dunbia brand in the UK, Browne said.
The company serves major retailers, manufacturers and food service operators in more than 50 countries.
Last year, Allliance reported an after-tax loss of $95.8m for the 12 months to September 30, compared to a loss of $70m in the year prior.
Turnover slipped to $1.8b from $2b in 2023.
The result reflected the tough global trading conditions, especially for lamb.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
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2 hours ago
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A new era is dawning for Alliance Group and how that plays out now lies in the hands of its 4000-odd shareholders. On Tuesday, the red meat industry's worst-kept secret was confirmed; Irish company Dawn Meats Group would take a 65% stake in the wholly farmer-owned co-operative for $250 million, subject to shareholder and regulatory approvals. Alliance says the investment will reduce its short-term working capital facility by about $200m, accelerate the board's strategic capital expenditure programme and enable the distribution of up to $40m to the co-operative, subject to shareholder livestock supply. In many ways, it is a repeat of 2016 when China's Shanghai Maling (now Bright Food Group) took a 50% stake in Silver Fern Farms for $267m. Just like then, one has to ask if shareholders do not give the international investment a tick at a special general meeting in October, then what? For Silver Fern Farms, there was no other option and it is looking very similar for Alliance. It was 1948 when a collective of Southland farmers came together to establish Alliance Freezing Company Ltd. In 1980, the company underwent a change in ownership structure, transitioning into a co-operative. Since then, it has proudly lauded its farmer-owned status, particularly — and rather smugly — following the Silver Fern Farms' Chinese deal which left it the only true 100% farmer-owned red meat co-operative. Alliance farmers have now been forced between the proverbial rock and hard place. The future of their co-operative lies with them; say yes to the deal and 65% of ownership of what has been a traditional proud southern company goes offshore. Chief executive Willie Wiese says it could trade its way out but the time it would take was far too long from a banking perspective. So say no, and the bankers will be banging on the door. There appears to be little room for sentiment or tradition. It is somewhat inexplicable that Alliance finds itself in this position, with many questioning how a company can go from a record $116.3m profit in 2022 to two thumping losses in the following years. Last year, experienced agribusiness leader Mark Wynne was appointed chairman of Alliance and he did not mince words when it came to the task at hand. "I'm not doing this for a good time or a long time. This is damn hard work. We've got an enormous amount to do to turn this big super-tanker around," he said at the time. So why was the super-tanker ever grounded in the first place? And where is the accountability from those who allowed it to get so far off course? The future ownership of the co-operative might lie with its farmers but it is not those folk who got their company into such a perilous position that selling 65% of it is the only way forward. Mr Wynne has previously said that remaining a 100% farmer-owned co-operative was a choice and if farmers wanted it to remain that way, then the company needed their livestock. That was their clearest way of showing their support. But loyalty is a two-way street and Alliance used to have that in spades from its suppliers. Over time, it has eroded. For farmers already battling with rising on-farm costs, a few dollars more on their killing sheet from selling to a competing company offering a better price makes a substantial difference. Dollars and service can quickly replace any misty-eyed values around tradition and 100% farmer ownership when it comes to paying the ever-present stack of bills. Alliance has signalled site closures and asset sales are possible if the Dawn Meats deal is not inked. The company is a large employer, particularly in the South, and that would have huge ramifications for both rural and urban communities. But as livestock numbers continue to fall amid pine-tree studded farmland, the long-standing wider issue of over-capacity in the country's red meat sector continues to be the elephant in the paddock, and plant closures appear inevitable. What is guaranteed is that more change is coming in the sector — to be sure, to be sure.
