Overseas company wants to buy stake in NZ red meat co-operative Alliance Group
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The future of New Zealand red meat co-operative Alliance Group may soon be in the hands of owners overseas.
Irish company Dawn Meats Group proposes to buy a 65 percent stake for $250 million, subject to shareholder voting later this year.
Dawn Meats is one of Europe's largest meat processors with annual revenue of $5.8 billion. It has been linked to a potential deal since last month.
Farmer-shareholders in Alliance Group were informed on Tuesday morning of the board's preferred and unanimously recommended option.
Marlborough sheep and beef farmer Scott Adams is a shareholder in Alliance.
Adams said he'd have preferred to see a 50:50 ownership deal to maintain local control.
"To be straight up it's a bit disappointing. Alliance was the last freezing works co-op left," Scott Adams said.
"It will be interesting to see what they say on making the industry stronger and making Alliance stronger in this proposal.
"In a perfect world keeping a majority owned by New Zealand farmers would be great, but we've got to be realistic too."
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Alliance Group chair Mark Wynne said the board fully endorsed the deal.
The proposed transaction would see Dawn Meats Group values Alliance at NZ$502 million on an enterprise basis - subject to shareholder acceptances, High Court and regulatory approvals.
Proceeds from the transaction would be used to reduce Alliance Group's short-term debt by $200 million.
It would enable the distribution of up to $40 million to the co-operative.
Alliance Group Chair Mark Wynne.
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"Alliance was built by farmers for farmers and has 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," Mark Wynne said.
He said Alliance ran out of local options to clear its debt and had no choice but to accept the next best offer.
"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 per cent stake grow over the long term."
The sale will require a high level of approval. It will be implemented via a Scheme of Arrangement and will require a minimum of 75 per cent shareholder acceptance of those who vote, and greater than 50 per cent of all shareholding voting yes at a Special General Meeting (or via proxy) to be held in Invercargill in mid-October.
Federated Farmers meat and wool chair Richard Dawkins said farmers need to weigh up the options carefully.
He recommends they attend the farmer road shows which will begin in late September.
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