Cautious support for SFF-PGG deal

Some Silver Fern Farms shareholders believe the meat company could struggle to get the 75% approval needed for the sale of 50% of the co-operative to PGG Wrightson.

Those spoken to this week cautiously supported plans for the $220 million deal, which would see the Dunedin meat co-operative merge with publicly listed rural services company PGG Wrightson, but many were still hopeful of a wider meat industry merger.

They were pleased to see progress in addressing problems facing the ailing meat industry, but had some questions about how it fitted into wider industry restructuring and strategy.

North Otago farmer David Ruddenklau said the announcement raised more questions than it gave answers, and, like many other farmers, he was keen to see more detail.

"In the short term, does it actually have the ability to address the issues relating to market overcapacity in the processing industry and, overall, the long-term strategy for the industry?"

The merger could be the impetus for change, but he said farmers he had spoken to felt it could struggle to get the required 75% shareholder support because of concerns about blending co-operative and corporate business principles.

Mr Ruddenklau said a viable long-term strategy for the industry was more important than farmers retaining control, a point echoed by others.

South Otago farmer Graham Clarke said farmer control of the meat industry had produced mixed results.

"Farmer ownership and control of co-operatives does not appear to have distributed ongoing wealth to sheep and beef farmers, so the idea you have to have overall control doesn't appear to have been too successful."

Mr Clarke questioned claims the merger would create an integrated supply chain from paddock to plate, saying he failed to see how that would occur.

But he applauded PGG Wrightson chairman Craig Norgate's attempts to change the industry, especially if it resulted in an SFF-Alliance Group merger.

Ida Valley farmer Gerard Flannery also applauded attempts to resurrect the industry, but said farmers should not forgo profit dividends so PGG Wrightson could be paid.

Keith Neylon, a Southland farmer and businessman, said SFF and Alliance had proven unable to sort out industry issues and he hoped PGG Wrightson's involvement would be the catalyst for a merger.

Red meat was a global industry, a fact that had been forgotten, he said.

"When you hear talk about loss of farmer control, it begs the question 'What have they done with the control they have had?"'Wanaka farmer and businessman Andy Ramsden said farmers should reflect on the perilous state of the industry when considering how to vote.

"We've got to such a crisis point with profitability in this industry that we need to think beyond what is a nice position and face economic reality."

The country's largest farmer, Landcorp, was also waiting for more detail before taking a position, but chief executive Chris Kelly said the deal would be positive if it encouraged more consolidation.

Along with consolidation, Mr Kelly said meat companies needed to rationalise plants, increase capital, invest in marketing overseas and stop undercutting other New Zealand companies.

While that wish list was unlikely to be addressed by this step, Mr Kelly said at least it was start.

 

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